UK construction sector is showing strong growth despite housing challenges

In April, activity in the UK construction sector grew at the fastest pace in more than a year, according to a new survey from S&P’s Purchasing Managers’ Index (PMI). Despite this overall growth, housing construction continued to face challenges.

The construction PMI was 53.0 in April, indicating growth and exceeding expectations. Of the subsectors, commercial construction saw the largest increase in activity, with a score of 53.9. This growth was attributed to a turnaround in customer demand, partly driven by renovation projects. Civil engineering activity also grew strongly, reaching the strongest pace in nine months at 53.6.

Greater confidence in the wider UK economic outlook helped boost demand in the construction sector. However, housing construction struggled, with the PMI falling to 47.6, indicating a decline and the fastest decline since January. Housing construction has been under pressure in recent years due to higher interest rates, with the current bank rate standing at 5.25%.

The increase in mortgage rates since the start of the year has dampened demand for new homes, impacting the housing sector. Despite continued growth in output and new work, the survey showed a marginal decline in employment, often due to the failure to replace voluntary leavers due to cost pressures and the completion of major projects.

Looking ahead, optimism for the year ahead increased in April, with almost half of the survey panel expecting an increase in output in the coming year. Respondents cited improving sales demand and hopes for rate cuts as factors contributing to this optimism.