UK construction sector grows at fastest pace since May 2022

Activity in the UK construction sector grew in July at the fastest pace in 26 months, according to a survey released on Tuesday.

The headline S&P Global UK construction purchasing managers’ index rose to 55.3 from 52.2 in June. This marked the fastest rate of expansion since May 2022.

A reading above 50.0 indicates growth, while a reading below signals contraction.

The survey found that all three categories of construction saw activity increase in July as work on housing projects returned to growth.

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

Andrew Harker, economics director at S&P Global Market Intelligence, said: "The election-related slowdown in growth seen in June proved to be temporary, with the pace of expansion roaring ahead in July. Firms saw the strongest increases in new orders and activity since 2022 as paused projects were released amid reports of improved customer confidence.

"The strength of demand moved the sector closer to capacity, bringing a recent period of improving supplier performance to an end. There were also signs of inflationary pressures picking up, something that will need to be watched closely if demand strength continues in the months ahead."

Matthew Pointon, senior commercial real estate economist at Capital Economics, said: "The picture of a gradual recovery in activity was echoed in the latest RICS construction market survey. The headline workloads balance saw a marginal improvement to -8 in Q2, from -10 in Q1. Admittedly, that’s still consistent with a contraction in workloads, with the private housing balance dragging down the average. But the workloads expectations balance improved to 12, from 6, consistent with a small rise in activity over the next year.

"A rise in construction activity is in line with our belief that commercial property values have now bottomed-out. That will give developers the confidence to break ground on new projects, including in the troubled office sector where demand for new, sustainable offices has held up relatively well. In line with that, the new orders index rose to 55.6, a 28-month high."