Construction growth hits two-year high

Construction activity is growing at its fastest rate for two years, according to data published today (6 June).

The closely watched S&P Global Construction Purchasing Managers’ Index registered a higher score in May 2024 than at any point since the same month in 2022. The score of 54.7 rose from 53 in April. A score above 50 represents an increase in activity.

This represents a pace of growth that has not been seen since the brief surge between the Covid lockdowns and former chancellor Kwasi Kwarteng’s infamous mini-Budget.

Last month was also the first time in the past two years that all three broad sectors of the industry measured by the index saw increases in activity.

Commercial workloads led the way in May, while civil engineering levels were also up and housebuilding stepped up marginally from April.

Meanwhile, new orders rose for the fourth month in a row, and job creation was at its sharpest level since last September.

Supply-chain conditions continued to improve, with stock levels solid and input cost inflation slowing.

Construction firms also signalled a marked improvement in the availability of subcontractors in May, while the rates charged by these suppliers increased.

S&P Global economics director Andrew Harker said the construction industry was “building good momentum”.

“Particularly pleasing was the broad-based nature of the rise in activity as work on housing projects increased for the first time in more than a year and a half,” he added.

“Firms are gearing up for further growth in the months ahead, posting renewed expansions in both employment and purchasing activity as workloads increase.

“Moreover, the supply-chain environment continued to improve in May. Companies were able to secure inputs much more quickly than in April and at prices that were only slightly higher than in the previous month.”

Atul Kariya, head of construction and real estate at construction sector finance advisor MHA, said the latest data was “very positive news”.

“After months in the doldrums, there are definitely green shoots visible, which should continue throughout the summer months,” he added.

“The significant increase in the commercial category shows that the industry is now on a firmer footing than it has been for a considerable time, particularly given the slightly more positive economic indicators and the potential for a cut in interest rates later in the summer.”

Terry Woodley, managing director of development finance at bank Shawbrook, said the data should create “further optimism”.

But he cautioned: “Market volatility and the possibility of predicted interest rate cuts being pushed back to later in the year mean lenders have had to raise rates in some areas, an additional cost for developers to factor in alongside the rising costs of materials and labour.”

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