UK Construction Sector Shows Strong Growth Despite Housebuilding Challenges

In April, business activity in the UK construction sector expanded at its fastest pace in over a year, according to a new survey by S&P’s purchasing managers’ index (PMI). Despite this overall growth, housebuilding continued to face challenges.

The PMI for the construction sector recorded 53.0 in April, indicating growth and surpassing expectations. Among the sub-sectors, commercial construction saw the most significant increase in activity, with a score of 53.9. This growth was attributed to a turnaround in customer demand, driven partly by refurbishment projects. Civil engineering activity also expanded robustly, reaching its strongest pace in nine months at 53.6.

Greater confidence in the broader UK economic outlook contributed to increased demand across the construction sector. However, housebuilding struggled, with its PMI falling to 47.6, indicating a decline and marking the fastest rate of decline since January. Housebuilding has faced pressure in recent years due to higher interest rates, with the current Bank Rate standing at 5.25%.

The rise in mortgage rates since the start of the year has dampened demand for new homes, affecting the housebuilding sector. Despite sustained growth in output and new work, the survey showed a marginal reduction in employment numbers, often due to the non-replacement of voluntary leavers amid cost pressures and the completion of major projects.

Looking ahead, optimism for the year ahead increased in April, with nearly half of the survey panel anticipating a rise in output over the next year. Respondents cited improving sales enquiries and hopes for interest rate cuts as factors contributing to this optimism.

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