October saw a dip in construction output due to high borrowing costs.
- The Construction PMI showed a decline to 54.3 from September’s 57.2.
- Despite the slowdown, the output remains above the 2024 average of 51.4.
- Commercial and civil engineering growth slowed, while housebuilding contracted.
- Job creation rose to a three-month high, yet business optimism is low.
In October, high borrowing costs led to a noticeable reduction in construction output, as recorded by the S&P Global UK Construction Purchasing Managers’ Index (PMI). This index fell to 54.3, down from a high of 57.2 in September, but still above the year’s average of 51.4, suggesting ongoing sector activity despite the challenges.
Commercial and civil engineering sectors experienced a slowdown in growth rates during October. Housebuilding, notably, contracted with an index score of 49.4, attributed to governmental policy uncertainty and fragile consumer confidence, alongside elevated borrowing costs. Jordan Smith, a technical director at Thomas & Adamson, highlighted how a slight uncertainty contributes to slower sector growth.
Civil engineering remained the best-performing sector in construction, recording a 56.2 value. Although this was down from September’s 59, there was strong output growth, bolstered chiefly by demand in energy infrastructure projects, especially renewables.
The commercial sector also saw growth, albeit at a slower pace, registering 52.8 compared to 55.2 in September. Tim Moore from S&P Global Market Intelligence noted a solid expansion across all areas, forecasting a robust improvement in construction order books for the second half of 2024.
Interestingly, job creation in the sector peaked to a three-month high, marking a positive note against a backdrop of subdued business optimism. Output growth expectations have now descended to their lowest since December 2023, reflecting ongoing caution in the business environment.
Barry Goodall of Brabners voiced a cautious optimism about the sector’s future following renewed infrastructure investment announcements. However, he warned of ongoing challenges related to skills shortages and the increased national insurance burden on contractors looking to invest in their workforce.
The construction sector faces significant challenges ahead, tempered by strategic opportunities in infrastructure.
