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Highlights:
- Fastest growth in two years: UK construction output grew at the fastest rate since April 2022, with the PMI rising to 57.2 in September.
- Renewables lead growth: Civil engineering, driven by demand for renewables and infrastructure, emerged as the fastest-growing sub-sector.
- Rising costs: Input prices climbed at the highest pace in 16 months, driven by rising material costs and wages.
The UK construction sector experienced its fastest growth rate in over two years in September, driven by robust demand across civil engineering, commercial construction, and housing. According to the latest construction purchasing managers index (PMI) from S&P Global, the index rose from 53.6 in August to 57.2 in September, marking the highest reading since April 2022 and the seventh consecutive month of growth.
Strong Growth in Renewables and Infrastructure
Civil engineering emerged as the fastest-growing sub-sector in September, reflecting increased demand for renewable energy projects and infrastructure improvements. Tim Moore, economics director at S&P Global, pointed out that lower interest rates, domestic economic stability, and strong pipelines of infrastructure work had boosted order books, driving overall growth in the sector.
In addition to civil engineering, commercial construction and housing also contributed to the sector's momentum. The resurgence in these areas came as new project starts led to a moderate rise in employment levels and a faster increase in purchasing activity.
Rising Input Costs Amid Strong Demand
However, the surge in demand has led to rising input costs, with September seeing the fastest rate of input price inflation in 16 months. Higher costs for raw materials and increased wages were among the key factors contributing to the rise, as the construction sector faced higher operational expenses.
Despite the cost pressures, business optimism in the sector remained above last year’s levels, although it saw a slight dip compared to earlier in 2024. Expectations for future growth were supported by lower borrowing costs, which are anticipated to provide a further boost to housebuilding projects in the months ahead.
Outlook for the Construction Sector
While the sector remains on a growth trajectory, future challenges could arise from rising costs and potential fluctuations in demand. Nevertheless, the construction industry's current performance signals a positive outlook, especially as infrastructure investments and housing development continue to play a crucial role in driving the sector forward.
