UK construction sector grows at fastest pace in more than two years

Growth in the UK construction sector hit its highest level in more than two years last month amid optimism that Labour’s shake-up of planning laws would boost activity.

In the latest sign that the economy is emerging from last year’s recession , the monthly health check from S&P Global Market Intelligence showed all three parts of the sector – commercial property, housing and infrastructure – expanding strongly.

Andrew Harker, the 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.”

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S&P said its purchasing managers’ index (PMI) – a seasonally adjusted measure of activity in construction – rose from 52.2 in June to 55.3 in July, its highest level since May 2022. Any reading above 50 indicates the sector is growing rather than contracting.

Jordan Smith, the technical director at property consultancy Thomas & Adamson, said: “The growth in construction activity is beginning to pick up pace again, with genuine optimism that the new government’s plans will act as a further catalyst for the sector as a whole.”

S&P said success in securing new orders was the main factor leading to a rise in activity at the start of the third quarter. New business expanded for the sixth successive month.

Kelly Boorman, the national head of construction at the audit, tax and consulting firm RSM UK, said: “The headline construction PMI in July reached the highest level since May 2022, showing the industry is continuing its recovery. This reflects positive sentiment in response to the government’s focus on local housing targets with greater transparency towards planning and infrastructure.”

Harker said the pick-up in activity was causing prices to rise. “The strength of demand moved the sector closer to capacity, bringing a recent period of improving supplier performance to an end,” he added. “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.”