Reasons for optimism

6 March 2023

Statistics for February in the respected Purchasing Managers’ Index (PMI) produced by S&P Global and the Chartered Institute of Procurement & Supply (CIPS) show what is described as “a robust increase in overall business activity across the UK construction sector, thereby ending a two-month period of decline.”

The rate of growth was the strongest since May 2022, supported by a marked rebound in commercial work and a positive contribution from civil engineering activity. In contrast, however, housing activity decreased for the third month running.

The headline seasonally adjusted index – which measures month-on-month changes in total industry activity – registered 54.6 in February, up from 48.4 in January and above the neutral 50.0 threshold for the first time in three months. 

Commercial construction was the best-performing area in February (index at 55.3), with the rate of expansion the steepest for nine months. Civil engineering activity also returned to growth in February (index at 52.3), although the rate of expansion was only modest.

Construction companies reported signs of a turnaround in demand for commercial projects due to the improving near-term economic outlook.

And significantly, business expectations for the year ahead improved further from the 31-month low seen in December 2022. Around 46 per cent of the survey panel anticipate a rise in construction activity over the year ahead, while only 13 per cent predict a decline. 

Dr John Glen, Chief Economist at the Chartered Institute of Procurement & Supply, said: "The overall figure paints a bright picture of progress in the construction sector with a robust jump in output last month. 

"New order levels were also at their highest since November 2022 but these strong numbers belie the fact that there is uneven growth in building activity in the UK.

“Commercial and civil engineering projects dominated this performance with activity on projects such as HS2 and commercial builds. Residential building on the other hand was the odd one out with a third month in contraction as mortgages rates put a dampener on the number of house purchases and buyers were unwilling to commit,” he added.

"Builders themselves remained cheerful as optimism rose sharply and almost half of the survey’s respondents believed business would improve in 2023.” 

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