March brought an end to a six-month slide in UK construction activity as the industry edged back into positive territory.
Civil engineering was the best-performing segment, according to the latest monthly S&P Global UK Construction Purchasing Managers’ Index (PMI). Output levels increased at a marginal pace with reports of increased work on infrastructure projects and resilient demand in the energy sector.
House building and commercial construction were both broadly unchanged last month. The stabilisation in residential work was the best performance in more than a year for housebuilders who have struggled amid a market downturn triggered by higher interest rates and the cost-of-living crisis.
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The headline reading for activity across all sub-sectors edged up from 49.7 in February to 50.2 in March, the highest since August 2023. Any reading above 50.0 indicates an overall expansion in output.
"The near-term outlook for construction workloads appears increasingly favourable as order books improved again in March and to the greatest extent for just under one year," S&P economics director Tim Moore said.
"Construction companies generally commented on a broad-based rebound in tender opportunities, helped by easing borrowing costs and signs that UK economic conditions have started to recover in the first quarter of 2024."
There was a modest increase in new work received by construction companies. The rate of expansion accelerated since February and was the strongest for 10 months.
Nearly half of those surveyed anticipate a rise in output levels in the coming 12 months, while only 11% predict a decline. However, this was a deterioration from February when 51% said they expected a rise and only 6% predicted a decline.
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Purchasing costs rose for the third month in a row but the rate of inflation was marginal and the weakest during that period. March also saw another reduction in staffing numbers but again the rate of job shedding was only marginal, and less than in February.
Kelly Boorman, national head of construction at RSM UK, said it was encouraging to see housing activity at its highest since November 2022. However, there could yet be some problems on the horizon.
“Although the availability of subcontractors rose to 57.2 last month, with insolvencies predicted to rise significantly in the coming months and an uplift in activity across commercial and housing, this could create a perfect storm for shortages in the supply chain," she warned.
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