The headline S&P Global UK Construction Purchasing Managers’ Index (PMI) registered 54.3 in October, down from 57.2 in September.
However, September’s PMI score had been the highest for 29 months, and October’s 54.3 remains well above the crucial 50.0 no-change threshold for the eighth month running. The latest reading was also well above the average seen in the first half of 2024 (51.4) and signalled a solid expansion of total industry activity.
Civil engineering (56.2) was the best-performing category, with rising demand across a range of energy infrastructure projects, especially renewables.
Commercial work (52.8) also expanded in October, but the increase was the weakest since the current period of growth began in April.
House-building (49.4) was the only broad category of construction work to register an overall decline in output during October. This was the first decrease in residential activity since June, but the rate of contraction was only marginal. Some construction companies noted that elevated borrowing costs and uncertainty ahead of the autumn budget had constrained demand.
Total new work expanded at a solid pace in October, the survey found. Mirroring the trend for output growth, the latest expansion was softer than the two-and-a-half year high seen in September. Political uncertainty and subdued household demand due to cost-of-living pressures were cited as factors limiting new order growth in October. That said, many companies reported strong sales pipelines and tender opportunities linked to generally improving domestic economic conditions.
Higher levels of new business encouraged additional staff recruitment in October and the rate of job creation accelerated to a three-month high. Greater demand for staff was recorded despite a decline in optimism regarding growth prospects for the year ahead. Latest data indicated that construction companies were the least confident about their output growth projections since December 2023.
Suppliers' delivery times improved marginally in October. Lead times have now shortened in each of the past three months, according to these surveys, although some panellists noted that international shipping disruptions had limited the latest improvement in vendor performance.
The rate of inflation remained stronger than seen on average in the first half of 2024, albeit a little lower than in September. Survey respondents typically commented on higher raw material prices. Many firms suggested that an improved balance between supply and demand for construction inputs had led to increased competition between suppliers and helped to limit overall cost pressures.
Tim Moore, economics director at S&P Global Market Intelligence, said: "The construction sector signalled another month of solid output growth in October, despite being unable to match the highs seen in September. Business activity expansion was once again led by civil engineering work. Survey respondents widely commented on strong demand for renewable energy infrastructure projects.
"Commercial construction activity also increased again, albeit at the slowest pace since the current phase of expansion began in April. Improving domestic economic conditions helped to boost demand, but some construction companies reported delayed spending decisions ahead of the autumn budget. October data meanwhile indicated a decline in overall residential construction activity for the first time since June. Government policy uncertainty, fragile consumer confidence and elevated borrowing costs were all constraints on demand for house building projects.
"Total new work expanded at a solid pace in October, adding to signs of a robust improvement in order book pipelines across the construction sector in the second half of 2024. As a result, construction companies added to their payroll numbers at an accelerated pace. However, business optimism remained relatively subdued in comparison to the highs in the first half of the year, with output growth expectations now the lowest since December 2023."
Brian Smith, head of cost management at Aecom, said: “The construction industry has enjoyed a healthy period of output growth since early spring and October’s increase is another clear indicator of a revived industry believes it is moving to firmer ground.
“As we enter the winter trading period, the sector will be encouraged by the chancellor’s announcement to invest more than £100bn in critical infrastructure across the public estate – driving long-term growth and economic stability. To achieve this, the private sector will need to play a central role in ensuring these complex programmes get off the ground and deliver the vital services across healthcare, education and transport.
“With demand set to strengthen as 2025 approaches, the outlook is certainly brighter and a much-needed period of economic stability will stimulate a recovery in private sector investment.”
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