UK Construction Sector: Activity & Growth

GCS Associates is pleased to report a significant acceleration in the UK construction sector as we enter the second half of the year. The latest data from the S&P Global UK Construction Purchasing Managers’ Index™ (PMI) indicates a robust increase in both activity and new orders, with the index climbing to 55.3 in July from 52.2 in June.

This marks five consecutive months of growth and represents the fastest rate of expansion since May 2022.

Key Highlights:

• Activity Increase Across All Sectors: In July, all three categories of construction saw a rise in activity, with housing projects returning to growth. Commercial activity showed solid growth, while civil engineering experienced its fastest expansion in nearly two and a half years.
• New Orders and Business Expansion: The success in securing new orders at the start of the third quarter was a significant factor in the rise in construction activity. New business expanded for the sixth consecutive month at the strongest pace since April 2022. Improved customer confidence led to the release of previously paused projects.
• Rising Workloads and Employment: The increased workloads resulted in quicker rises in both purchasing activity and employment. Staffing levels increased for the third consecutive month, marking the fastest growth in a year. Purchasing activity also saw the most pronounced rise in almost two years.
• Supplier Performance: The heightened demand for inputs put some pressure on suppliers in July, resulting in unchanged lead times and ending a 16-month sequence of improving vendor performance. Issues with manufacturing and transportation were reported, although some suppliers maintained sufficient stock levels to meet orders.

• Future Outlook: Despite these challenges, construction firms remain optimistic about future activity. Although sentiment dipped to a three-month low in July, improved client confidence is expected to drive growth in new orders and subsequent activity.

Andrew Harker, Economics Director at S&P Global Market Intelligence, stated: “The election-related slowdown in growth seen in June proved to be temporary, with the pace of expansion roaring ahead in July. Firms saw the strongest increases in new orders and activity since 2022 as paused projects were released amid reports of improved customer confidence. The strength of demand moved the sector closer to capacity, ending a recent period of improving supplier performance. There were also signs of inflationary pressures picking up, something that will need to be watched closely if demand strength continues in the months ahead.”

Michael Parry, Managing Director at GCS Associates comments:

“The recruitment market is also following suit, with a significant uptick in activity. We are seeing a high volume of vacancies across the sector, reflecting the overall growth and optimism within the industry. This surge in hiring is a positive indicator of the sector’s robust health and its promising outlook for the coming months.”

GCS Associates will continue to monitor these developments closely and provide updates on the trends and opportunities within the UK construction sector.