Optimistic outlook

6 February 2024

In surprising but welcome findings in its survey on the mood of the construction industry taken in January, the respected S&P Global UK Construction PMI index reports that sector optimism has hit a two-year high, despite subdued order books. 

Survey respondents cited hopes of a turnaround in client demand due to looser financial conditions and more favourable underlying economic prospects. 

The headline index for changes in total industry activity registered 48.8 in January, up from 46.8 in December and the highest reading since August 2023. That said, the figure remained below the 50.0 no-change threshold for the fifth month running and signalled a moderate decline in total industry activity. 

Civil engineering was the best-performing segment (index at 49.8). Commercial activity also showed some resilience, with the respective index at 49.1, while house building continued to fall sharply at the start of 2024, with its index at 44.2. The rate of contraction for residential activity nonetheless eased to the least marked since March 2023. 

Companies reporting a fall in new business generally cited delayed decision-making among clients and subdued market conditions, especially in the house building segment. 

However, despite subdued order books, latest data signalled a sharp upturn in business activity expectations. Around 51% of the survey panel forecast a rise in business activity during the year ahead, while only 12% predict a decline. This pointed to the highest level of business optimism since January 2022. 

Lower borrowing costs and higher consumer confidence were cited as factors likely to boost construction activity over the course of 2024. 

Tim Moore, Economics Director at S&P Global Market Intelligence, which compiles the survey said: "UK construction companies seem increasingly optimistic that the worst could be behind them soon as recession risks fade and interest rate cuts appear close on the horizon.” 

Photo: Samuel Regan-Asante/Unsplash 

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