Construction sector hit by waning activity ahead of Budget
Business activity expectations in the construction industry have fallen to the lowest since the end of 2022 as companies remained glum on future outlook ahead of the Autumn Budget.
The latest Purchasing Managers Index (PMI) from S&P Global showed construction output showed the industry hit its highest level for three months at 46.2 – though remained well below the all-important 50.0 threshold that indicates whether a sector is growing.
This marked the ninth consecutive month construction fell below the mark, signalling a “solid rate of contraction”.
The report said business activity expectations were “subdued” at the second-lowest since December 2022 with some shred of optimism offset by “concerns about the UK economic outlook”.
Still, commercial construction was the only-sub sector to register reduction at a faster rate of decline in September.
A scarce field for new projects was cited as the main factor holding the sector back. Employment numbers shrank for the ninth consecutive month.
‘Weak business optimism’ in construction
Tim Moore, economics director at S&P Global Market Intelligence, said: “Weak business optimism, shrinking workloads and robust cost pressures once again led to lower employment numbers across the construction sector.”
He added the fresh data suggested the UK construction sector was facing “pressure on multiple fronts as residential, commercial and civil engineering work all continued to decrease at solid rates.”
Moore said survey respondents had aired caution ahead of the Autumn Budget, with many clients putting plans on hold until after Rachel Reeves delivers her next fiscal event.
“A general reluctance to commit to major capital expenditure projects against a subdued domestic economic backdrop” was reported by respondents.
The news follows dire outlooks from both the services and manufacturing over the last week.
In services, business activity expansion fell to a five-month low whilst manufacturing struggled to bounce back despite some quiet optimism in recent months.
Disruption caused by a cyber attack on Jaguar Land Rover had ripple effects on the wider manufacturing sector, according to researchers.
Employment also fell for the eleventh consecutive month due to the pressures of a higher national minimum wage and Rachel Reeves’ hike to employers’ national insurance contributions (NICs).