Despite a slowdown, the UK construction sector continued to grow in October, driven by civil engineering projects.
- The PMI for October was 54.3, a decrease from September’s 57.2 but still above the growth threshold.
- Civil engineering, particularly in renewable energy, showed strong performance, while house-building saw a decline.
- Increased borrowing costs and political uncertainty limited demand, yet new work expanded at a solid pace.
- Optimism in the sector was muted compared to earlier in 2024, with the lowest growth projections since December 2023.
In October, the UK construction sector experienced continued growth despite a noticeable slowdown compared to the previous month. The Purchasing Managers’ Index (PMI) stood at 54.3, marking a decrease from September’s 57.2, which had been the highest in over two years. However, the index remained well above the crucial 50.0 mark, indicating an overall expansion in the industry for the eighth consecutive month. This performance was significantly better than the average of the first half of the year, demonstrating resilience amid economic pressures.
Civil engineering projects led the growth, particularly in the renewable energy sector. The reading for this category was 56.2, reflecting robust demand across various infrastructure projects. Commercial construction also noted growth, albeit at a more subdued rate since its current upward trend began in April. In contrast, the house-building sector faced a decline, with an index of 49.4. This downturn, the first since June, was attributed to higher borrowing costs and uncertainties surrounding the upcoming budget, leading to subdued demand from households.
The market saw an overall uptick in new work during October, despite the expansion being less vigorous than in September. Political uncertainty and the ongoing cost-of-living crisis were noted as constraints affecting the pace of new orders. Nevertheless, companies reported a solid pipeline of projects and tender opportunities, driven by improving national economic conditions. Consequently, construction firms increased hiring, with employment growth reaching a three-month high.
While demand for new staff rose, confidence in the sector’s growth prospects for 2025 declined, reaching the lowest level since the end of 2023. Supplier delivery times improved slightly for the third month running, although global shipping challenges continued to pose some limitations. The rate of inflation, while lower than in September, was still higher than the average earlier in the year, with many firms commenting on elevated raw material costs.
Industry voices expressed cautious optimism. Tim Moore, economics director at S&P Global Market Intelligence, noted the solid output growth in October, driven by civil engineering and renewable energy projects. Despite challenges, there was a marked improvement in new work and employment figures, suggesting underlying stability in the market. Brian Smith from Aecom highlighted the steady growth since early spring, pointing to future opportunities as the government plans substantial infrastructure investments.
The UK construction sector demonstrates resilience with steady growth in October, led by civil engineering projects despite broader economic uncertainties.
