Remarkable performance of the residential sector boosts construction sector
The UK construction industry maintained steady growth in August 2024, despite a slight easing from July’s peak. According to the latest data from the S&P Global UK Construction PMI®, total construction output continued to expand for the sixth consecutive month, driven by robust new orders and a more favorable economic climate.
The Purchasing Managers’ Index (PMI) for August stood at 53.6, down from 55.3 in July but well above the 50.0 threshold, indicating sustained industry expansion. Commercial construction led the sector’s growth with a PMI of 53.7, though the pace slowed to its weakest since March. Sales inquiries and new orders following the general election played a significant role in maintaining momentum in commercial activity.
One of the key highlights of the report was the remarkable performance of the residential sector, which experienced its fastest growth since September 2022. The PMI for residential work reached 52.7, as improved market conditions and lower borrowing costs boosted housing activity. This uptick in the housing market is seen as a vital element of the construction sector’s broader recovery.
In contrast, civil engineering lagged behind, with a PMI of 51.8, marking only moderate growth. Respondents cited concerns over public sector budgets and uncertainty surrounding future infrastructure projects, which could impact long-term growth in this segment.
New orders continued to rise, reflecting improving customer demand amid greater political stability and better economic conditions. The August survey also revealed a relatively optimistic outlook, with 50% of respondents expecting output to increase over the next 12 months, while only 9% anticipated a decline.
However, challenges remain. Employment in the sector stagnated, ending a three-month period of job growth. Firms delayed hiring due to rising wage pressures and difficulty in finding qualified candidates. Subcontractor usage declined for the first time since January, and input costs, although more subdued, were still elevated, driven by rising raw material prices.
Looking ahead, the industry appears cautiously optimistic. Stronger sales pipelines and new project starts are expected to sustain momentum in the coming months, but infrastructure spending remains a concern.
Overall, August’s performance underscores the resilience of the UK construction sector, even as it navigates evolving market conditions. The outlook for the remainder of 2024 remains positive, particularly in the residential and commercial segments, providing a hopeful trajectory for the industry.
