Boom in civils work keeps index firmly in positive territory

Construction activity grew at its fastest rate in more than two years with a surge in civils work helping keep a bellwether index in positive territory for the fifth successive month.

The S&P Global UK construction Purchasing Managers’ Index rose to 55.3 in July from 52.2 in June, the fastest rise in growth since May 2022.

The report said: “All three categories of construction saw activity increase in July as work on housing projects returned to growth.

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Another cut in interest rates by the Bank of England is expected before the end of the year, helping the fledgling recovery in the housing sector

“Commercial activity increased solidly but the fastest expansion was seen in civil engineering activity, where the rate of growth quickened to the sharpest in almost two-and a half years.”

Andrew Harker, economics director at S&P Global Market Intelligence, admitted: “The election-related slowdown in growth seen in June proved to be temporary.”

The report said staffing levels increased for the third month running to keep up with demand, although increased demand on supply chains was putting the brakes on availability.

Thomas Pugh, economist at RSM UK, said: “Moves by the new government to ease planning restrictions have probably boosted sentiment, especially around house building. The cut in interest rates in early August will be followed by at least one more cut this year, which will also be supportive of the housing market, which should feed through into housebuilding.

“As a slight note of concern, the input price balance rose to 53.7. There is clearly a huge shortage of skilled labour in the industry and as output ramps up, demand for that limited pool of labour may put upward pressure on costs.”

And Brendan Sharkey, construction partner at accountant and advisory firm MHA added: “The rhetoric from the new UK government so far has been good and will please the construction industry. However, the recent announcements on the cancellation of major infrastructure contracts has caused some concern. The devil will be in the detail [and] for many reasons the budget in October should clarify much of this and it cannot come quickly enough.”

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