The UK construction sector recorded its biggest rise in activity in two years last month. According to new survey data, this marks the first increase in housebuilding since just after former Prime Minister Liz Truss’ mini budget in September 2022.
The S&P Global UK Construction Purchasing Managers’ Index rose from 53 in April to 54.7 in May, surpassing the median forecast for a fall to 52.5 in a Reuters poll of economists, reaching its highest figure since May 2022.
Output had fallen 0.9% in both the final quarter of 2023 and the first quarter of 2024, which had been highlighted as the largest declines since mid-2021.
Andrew Harker, S&P Economics Director, said: ““Firms are gearing up for further growth in the months ahead, posting renewed expansions in both employment and purchasing activity as workloads increase.”
Due to slower growth in the services sector, the all-sector PMI – which factors in results from manufacturing sectors and larger services earlier this week – had previously dropped from a one-year high of 54 in April to 53.1 in May.
Activity in housing, commercial construction and civil engineering all rose. For the first time since October 2022 house building increased, following a surge in borrowing costs and a sharp decline in house purchases that occurred as a result of Truss’ budget plans.
S&P also said: “Firms linked higher new orders to the winning of new contracts and the commencement of previously delayed projects.”
The cost of subcontractors rose by the most in nine months, while raw material costs increased at the slowest pace so far in 2024.
In recent weeks, financial markets have tempered their expectations for an interest rate cut by the Bank of England and do not fully price in a first quarter-point rate cut until November.
