Growth in UK construction sector slows amid housebuilding decline

The UK’s construction sector saw growth ease back last month after striking a two-year high in September, according to new data.

It was partly driven by the first contraction in housebuilding activity for four months, as firms said increased borrowing costs and uncertainty ahead of the autumn Budget dragged on demand.

The latest S&P Global construction purchasing managers’ index (PMI) scored 54.3 in October, down from 57.2 in the previous month.

Any reading above the 50.0 threshold indicates that activity in the industry is increasing, while anything below means it is shrinking.

The latest figure shows there was still significant growth last month, although this was below the 55.1 reading predicted by economists.

Tim Moore, economics director at S&P Global Market Intelligence, said: “The construction sector signalled another month of solid output growth in October, despite being unable to match the highs seen in September.

“Business activity expansion was once again led by civil engineering work.

“Survey respondents widely commented on strong demand for renewable energy infrastructure projects.

“Commercial construction activity also increased again, albeit at the slowest pace since the current phase of expansion began in April.”

The data showed that civil engineering was once again a key driver for growth across the sector, supported by new energy infrastructure projects, with a reading of 56.2.

Commercial construction work also grew, although at a slower rate than in recent months.

Meanwhile, housebuilding reported a reading of 49.4 for October, showing a slight decrease in activity.

This represented the first fall since June.

The survey said that “some construction companies noted that elevated borrowing costs and uncertainty ahead of the autumn Budget had constrained demand”.

As a whole, new work continued to grow at a solid pace over the month, dipping just slightly from the 29-month high reported in September.

Matt Swannell, chief economic adviser to the EY Item Club, said the organisation “cautions against reading too much into the drop-off” in overall construction activity last month.

“September’s reading was a 29-month high, and the October survey continues to point to healthy growth in the sector, outperforming the average over the first half of this year,” he added.

“With the Bank of England almost certain to cut bank rate by 0.25 percentage points tomorrow, and further interest rate reductions into 2025 likely, conditions look to be in place for continued growth in the sector.

“Indeed, survey respondents reported that the pipeline of new work remains decent, although uncertainty around the autumn Budget weighed on demand in October.”