Construction buyers report return to growth

Grant Prior 2 years ago
Share

UK construction companies saw a modest increase in business activity during September representing a return to growth after two months of falling output.

But optimism for future prospects dropped to its lowest level for two years as the prospects of higher interest rates and a downturn in the wider UK economy cast a cloud on construction.

The S&P Global/CIPS UK Construction Purchasing Managers’ Index hit 52.3 in September from 49.2 in August – above the crucial 50 no-change mark for the first time since June.

House building was the best-performing category in September (index at 52.9), with growth reaching a five-month high.

Commercial work increased only marginally (51.0), while civil engineering activity (49.6) fell for the third month in a row.

Tim Moore, Economics Director at S&P Global Market Intelligence, which compiles the survey said: “UK construction companies experienced a modest increase in business activity during September, but the return to growth was fuelled by delayed projects and easing supply shortages rather than a flurry of new orders.

“Reports of delivery delays for construction products and materials were the least widespread since the pandemic began as greater business capacity and improved transport availability helped to ease pressure on supply chains.

“However, forward-looking survey indicators took another turn for the worse in September, with new business volumes stalling and output growth expectations for the year ahead now the lowest since July 2020.

“This reflected deepening concerns across the construction sector that rising interest rates, the energy crisis and UK recession risks are all set to dampen client demand in the coming months.”

Dr John Glen, Chief Economist at the Chartered Institute of Procurement & Supply, said: “Developments in the UK economy have given the sector food for thought as supply chain managers reported softer levels of buying last month and the new orders index slipped to its lowest since May 2020.

“Though the headline index showed growth after two months in contraction, the devil lies in the detail pointing to lower customer confidence, a challenging UK economy and recession on the doorstep.

“Firstly, the rise in output has no sign of sustainable growth behind it as without new pipelines of work any gains will soon leak away. This was not lost on builders themselves who reported the lowest level of optimism since July 2020 about business opportunities in the next year.

“Secondly, the costs of doing business and the cost of living are still high and rising. More expensive energy and salary pressures to secure skilled staff have contributed
to additional inflation, though 21% of building companies in the sector were still hiring to maintain capacity for current projects.

“The housing sector remained the strongest performer in September although with interest rates rising and mortgage costs affecting affordability rates especially for first-time buyers, this will be an obstacle for house building to keep up the momentum as we approach 2023.”

Latest news

Plan in for £3bn Lincolnshire mega data centre

3.3m sq ft Humber Tech Park will be one of Europe's largest data centres
2 days ago

Green light for Digbeth 1,300 homes scheme

Warner’s Fields scheme to start with excavation and landscaping of the River Rea
2 days ago

Flagship biodiversity net gain scheme flawed

NAO warns Government's flagship green development scheme at risk of failure
2 days ago

£210m M3 Junction 9 upgrade gains consent

VolkerFitzpatrick to start work in early 2025 on Winnall roundabout, near Winchester
2 days ago

United Living wins 14-year L&Q homes repairs deal

Trafford housing upkeep deal worth £205m
2 days ago

£400m Lewisham resi-led scheme advances

Land deal paves way for Amro Partners' 1,000-home London scheme
2 days ago

McLaren gets go-ahead for Grade II listed Leeds student scheme

Springfield House to be revamped and two new wings added
2 days ago

Piling giant to fit people alarms on all rigs

Cementation Skanska upgrades site safety systems
2 days ago

Vistry to make £800m profit after subcontractor cost cuts

House builder bullish about shareholder returns after asking suppliers for discounts
3 days ago

Shareholders approve £2.5bn Barratt and Redrow merger

Final hurdle is for the competition regulator to approve the deal.
3 days ago

Green light for £80m Leith waterfront revamp

Build-to-rent homes and student accommodation scheme to be built
3 days ago

Tilbury Douglas clears Interserve legacy jobs to return to profit

Revenue tops £500m in first year as standalone contractor
4 days ago

Land deal paves way for Manchester civil service office hub

Government buys five acres at former Central Retail Park
3 days ago

Speller Metcalfe wins Wolverhampton library upgrade

Full works are due to start in the autumn
3 days ago

Skills shortage puts big infrastructure projects at risk

Government failing as an intelligent client and now over-reliant on consultancies
4 days ago

Contractors face further insulation board price hikes

Cost of PIR insulation boards set to rise another 10%
4 days ago

Henry Boot wins £36m Rotherham Markets job

Project involves upgrading existing market and building a new library
4 days ago

Keltbray hires new head of infrastructure procurement

Lukasz Olszewski will oversee rail, energy and highways business units
4 days ago

Tunnel fit out robot to revolutionise civils work

Costain and VVB Engineering part of innovative consortium
4 days ago

Funding deal for £86m wind turbine test centre

Latest investment at National Renewable Energy Centre in Blyth
5 days ago

Plan in for Manchester ‘upside-down’ 18-storey tower

Landmark cantilevered NXQ building plan for city Northern Quarter
5 days ago

London 25km Super Sewer hooked up for commissioning

Tideway completes connection to existing Lee Tunnel sewer system
5 days ago

£200m Lincoln ring-road approved

North Hykeham Relief Road granted planning permission
5 days ago

£1bn Manchester Airport City plan rebooted as new sci-tech hub

Plan pivots from offices to science and manufacturing campus, called MIX Manchester
6 days ago

Record results at maintenance specialist Renew

Infrastructure maintenance work continues to pay off for contractor
5 days ago

Barhale lands £21m shaft scheme for Thames Water

Civils specialist bags latest upgrade deal on Thames Water Ring Main
5 days ago

Caddick names new north east director

Former Laing O'Rourke project lead joins Yorkshire contractor
5 days ago

Mount Anvil wins London Camden estate rebuild

Deverloper wins £133m Bacton Phase 2 development in Gospel Oak
6 days ago

London Met Uni seeks firm for £280m estate upgrade

A single partner contractor will deliver 10-year building upgrade plan
6 days ago

Top 30 M&E contractors set for growth – ranking

Growth in data centres and commercial refits creates optimism for year ahead
6 days ago

Contractor services