Last month marked the most significant surge in new work for construction SMEs in over two years, revealing a robust rebound in demand.
- The SME Business Activity index for construction, as tracked by a major bank, rose notably, indicating heightened industry activity.
- A positive forward-looking sentiment exists among firms, buoyed by improving economic conditions and increased housebuilding demand.
- Challenges remain, with SMEs reporting significant cost inflation driven by higher raw material prices.
- Overall, the construction sector shows promise for continued expansion, although financial accessibility remains a concern.
In a striking development, last month witnessed the most significant increase in new work for small and medium-sized construction enterprises (SMEs) in over two and a half years. This noteworthy change has been highlighted by a leading banking institution, which reports that the increase in workload occurred alongside the highest rate of output growth for smaller construction companies since January. The latest survey results from NatWest reveal a substantial uptick in activity, with their SME Business Activity index for the construction sector registering at 55.1 for September, far exceeding the neutral mark of 50 by more than five points—a clear indicator of amplified activity compared to the previous month.
Laura Capper, head of construction and manufacturing at NatWest, has pinpointed this upswing in construction activity among SMEs as a clear sign of rebounding demand. According to her, the growth is driven largely by the influx of new contracts and a renewed willingness to invest, particularly in the light of recent electoral outcomes. Construction firms surveyed by the bank reported not only an increased demand for work but also an influx of new contracts, which together buoy a highly positive outlook for the year ahead. Improving economic conditions and a stronger demand for housebuilding are frequently cited as key drivers behind the anticipated order book expansion over the next twelve months.
The update arrives in the wake of findings from a June survey conducted by Bibby Financial Services, which revealed that 58 per cent of SME construction business owners were optimistic about their order book prospects for 2025. However, these optimistic forecasts are tempered by challenges in financial accessibility, as firms report growing difficulties in securing finance. Additionally, the latest poll indicates a marked increase in operating costs for SMEs, primarily attributed to rising raw material prices. NatWest’s survey highlights the highest rate of cost inflation observed in nearly a year and a half.
Capper emphasises the critical nature of managing these cost escalations, as they will be crucial for SMEs to maintain their growth trajectory in the months ahead. Despite these challenges, the sector appears to be on solid ground, with an optimistic outlook and increasing workloads suggesting that the potential for continued expansion remains strong.
The construction sector’s resurgence highlights a promising trajectory, though financial challenges persist.
