UK construction sector returns to growth; business expectations hit 26-month low

by | Oct 6, 2022

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The UK construction sector returned to growth in September, but business expectations hit a 26-month low, according to a survey released on Thursday.
The S&P Global/CIPS construction purchasing managers’ index rose to 52.3 from 49.2 in August, coming above the 50.0 mark that separates contraction from expansion. The reading was also comfortably ahead of consensus expectations of 48.0.

House building was the best-performing category, with growth reaching a five-month high. Commercial work increased only marginally, while civil engineering activity fell for the third month in a row.

The survey also showed that business optimism for the coming 12 months pointed to the weakest growth projections since July 2020. While construction firms often commented on expected growth due to forthcoming new projects, many also suggested that recession risk and higher interest rates had weighed on confidence.

Tim Moore, economics director at S&P Global Market Intelligence, said: “UK construction companies experienced a modest increase in business activity during September, but the return to growth was fuelled by delayed projects and easing supply shortages rather than a flurry of new orders.

“Reports of delivery delays for construction products and materials were the least widespread since the pandemic began as greater business capacity and improved transport availability helped to ease pressure on supply chains.

“However, forward-looking survey indicators took another turn for the worse in September, with new business volumes stalling and output growth expectations for the year ahead now the lowest since July 2020. This reflected deepening concerns across the construction sector that rising interest rates, the energy crisis and UK recession risks are all set to dampen client demand in the coming months.”

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