UK construction companies indicated a loss of momentum at the end of 2024. Total business activity expanded at the slowest pace since last June, while new order growth moderated for the third month running.
The headline S&P Global UK Construction Purchasing Managers’ Index tracking changes in total industry activity – registered 53.3 in December, down from 55.2 in November and the lowest for six months.
Residential work was again the only category to register an overall decline in output during December (47.6). House building activity has now decreased for three consecutive months and the latest reduction was the fastest since June 2024. Survey respondents noted that subdued demand conditions, elevated borrowing costs and weak consumer confidence had all weighed on activity.
Commercial activity was the fastest-growing area of the construction sector in December (index at 55.0), followed by civil engineering (52.9). That said, both categories saw a slowdown in the rate of business activity expansion since November.
Commenting on the latest figures S&P Global Market Intelligence Economics director Tim Moore said: “”The slowdown in overall construction output growth reflected more subdued demand conditions in recent months, as illustrated by a further moderation in new order growth during December. Survey respondents commented on headwinds from elevated borrowing costs and the impact of fragile consumer confidence.”
Shawbrook managing director of development finance Terry Woodley commented: “Despite commercial work continuing to be a driver of construction activity in December, this hasn’t been enough to offset the dip in housebuilding activity, which remained subdued in the face of high borrowing costs and low confidence levels. As such, housebuilders have kept their cards close to their chest and curbed spending on new land until the market improves.
“Despite this, developers are quietly optimistic that 2025 will see the sector turn a corner. Mortgage rates are expected to reduce and the Government’s pro-housebuilding agenda should help to kickstart activity this year.”
MHA real estate and construction specialist Brendan Sharkey said the fall in construction PMI was hardly surprising as the industry continued to benefit from the government’s investment in infrastructure but at the same time was hampered by still historically high interest rates and an uptick in employment costs.
“Activity in the commercial sector remains strong, but housing has dipped. Whether the housing market will see a reversal in fortunes this year remains to be seen, however the opportunity to develop is clearly there given the planning reforms included in the recent NPPF.”
He added: “From what our clients are telling us, 2025 is expected to be better than last year; however, it’ll be a slow burn. Infrastructure will do well given the government’s investment plans, as will commercial as the UK is becoming an investment choice for many. Housing supply will be available but it’s whether demand will follow if interest rates remain stubbornly high.
“We expect that construction PMI will hover around the same level as it is currently for much of 2025, and any spikes are likely to be short-lived. Although growth will be slow and steady the fundamentals for the sector are solid and there is an air of quiet optimism.”
