Business confidence at its lowest level in two years
Construction output increased in September for the first time in three months as easing supply shortages helped cover softening demand.
According to the latest PMI data, the month saw the weakest trend for new orders since the beginning of the post-Covid recovery in July 2020 and business confidence dropped to its lowest level in two years.
However, the industry posted an index reading of 52.3, up from 49.2 in August. Survey respondents commented that the boost to activity came in part from work on previously delayed projects.
Tim Moore, economics director at S&P Global Market Intelligence, which compiles the survey, said: 鈥淭he return to growth was fuelled by delayed projects and easing supply shortages rather than a flurry of new orders.
鈥淩eports of delivery delays for construction products and materials were the least widespread since the pandemic began as greater business capacity and improved transport availability helped to ease pressure on supply chains.鈥�
New business volumes were broadly unchanged overall, which firms attributed to slow decision-making among clients and greater risk aversion because of inflation and concerns about the broader economy.
Recent weeks have seen the value of the pound plummet following the new chancellor鈥檚 announcement of expensive tax cuts.
>> Sterling collapse will hit margins 鈥榠n all parts鈥� of construction, say economists
Softening demand and reduced inventory building 鈥� a result of greater faith in suppliers 鈥� combined to bring about a marginal reduction in purchasing activity.
Dr John Glen, chief economist at the Chartered Institute of Procurement & Supply, said the rise in output had 鈥渘o sign of sustainable growth behind it鈥� and that this was 鈥渘ot lost on builders鈥�
Housebuilding was the best performing category in September (index at 52.9), with growth reaching a five-month high, though Dr Glen warned that rising interest rates would be an 鈥渙bstacle for house building to keep up the momentum鈥� going forward.
Meanwhile, commercial work increased marginally (51.0) and civil engineering activity (49.6) fell for the third month in a row.
Average cost burdens increased sharply in September, but the overall rate of inflation eased to its lowest level since February 2021, which survey respondents attributed to lower fuel prices and improved transportation availability.
Employment growth accelerated in September from August鈥檚 17-month low, with roughly 21% of the survey panel reporting a rise in staffing levels.
Responding to the index, SCAPE chief executive Mark Robinson said the restoration of the pound to pre-mini budget levels would 鈥減rovide greater short-term certainty鈥� on prices but said inflation would still affect both public and private sector projects.
鈥淥ur figures show the sector delivered more than 拢1bn in social value for local communities during the post-pandemic recovery, but we risk seeing the progress of vital regeneration slowing if conditions remain volatile for a sustained period,鈥� he said.
Max Jones, director in Lloyds Bank鈥檚 infrastructure and construction team, said that in the face of the current uncertainty contractors could take some confidence from having navigated the past two years鈥� disruptions.
鈥淲hile other announcements have stolen the headlines, the construction industry will also be broadly welcoming the new infrastructure measures unveiled by the Chancellor in his fiscal statement,鈥� he said.
鈥淭he projects announced will provide a clearer pipeline of road and rail projects to bid on. However, it is still not clear how the workforce to carry out these projects will be resourced when the labour market is already tight.鈥�
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