Earlier this year, the UK construction industry experienced incredibly positive growth, reaching a nine-month high in February 2023. With the impact of COVID-19, the rise in inflation, and companies struggling to acquire materials, there have been fears of a recession, however, recent reports have shown signs of recovery.
The S&P Global/CIPS UK Construction Purchasing Managers’ Index (PMI) tracks the amount of construction activity within the UK, comparing data from the previous month. The index is recorded by the sum of the percentage of ‘higher’ responses and half the percentage of ‘unchanged’ responses, with any reading over 50 showing an increase in construction activity. In February, the PMI recorded 54.6 in activity, which was significantly higher than January’s figure of 48.4. This bounce back of 54.6 also passed the last highest recording in May 2022 of 49.1, indicating positive growth.
Within the report, there are different sub-sectors which show the success within the construction industry. The best-performing sub-sector was commercial construction, with an index of 55.3, and civil engineering also had a positive result of 52.3.
Unfortunately, one area that is still on a three-month decline is residential construction, with an index score of 47.4 in February. However, although this shows a fall in activity, it was expected, as house prices and interest rates have creeped up, consequently leading to lower demand. Hopefully, this will start to get back on track later on in the year.
Tim Moore, Economics Director at S&P Global Market Intelligence, stated:
“Business activity in the UK construction sector returned to growth during February as a rebound in commercial work and civil engineering output helped to compensate for housing market weakness.
“Cutbacks to new house building projects remained the weak spot for construction sector activity, with total residential work falling for the third month running in February. Survey respondents often commented on subdued demand and a headwind from elevated interest rates.”
The construction industry is an essential part of the UK's economy, and the fact that it is showing signs of recovery is great news for everyone. It means that there will be more jobs available for people across the country and businesses will feel more confident about investing in new projects. However, although there has been positive movement, the UK construction industry should still be slightly cautious due to rising energy prices. No one can really predict the future of the construction industry, only time will tell!
For more information or to view the construction activity index report, please click here.
