At 55.2 in November, up slightly from 54.3 in October, the PMI data pointed to a robust and accelerated expansion of overall construction activity. The headline index has now posted above the neutral 50.0 threshold for nine months running.

A faster upturn in construction output was driven by the strongest rise in commercial work for two-and-a-half years (index at 58.1). Survey respondents commented on improving customer demand and new opportunities to tender, despite relatively subdued economic conditions. Civil engineering activity (55.9) also expanded at a strong pace in November. That said, the rate of growth slipped to a three-month low.

House building (47.9) remained by far the weakest-performing category of construction work in November. The respective seasonally adjusted index was inside negative territory for the second month in a row and signalled the fastest rate of decline since June. Construction companies once again noted that elevated borrowing costs and fragile consumer
confidence had an adverse impact on demand conditions.

New business volumes increased across the construction sector as a whole for the tenth successive month in November and at a sold pace. The rate of growth nonetheless slipped to its lowest since June. There were some reports that political and economic uncertainty linked to the Autumn Budget had affected client confidence. Where growth was reported, with was often linked to new projects in the commercial sector.

November data highlighted only a marginal rise in employment numbers, with the rate of job creation easing to a three-month low. Anecdotal evidence highlighted increasing employment costs as a factor holding back staff hiring. Some construction companies commented on greater use of sub-contractors to help mitigate rising costs. This was signalled by an increase in sub-contractor usage for the first time since July. Latest data nonetheless pointed to the steepest increase in sub-contractor charges for 16 months.

Purchasing activity meanwhile increased at the slowest pace since the current phase of expansion began in May, largely reflecting a loss of momentum for new order growth.
Supplier performance deteriorated to the greatest extent since February 2023, with survey respondents mainly citing transportation issues and international shipping delays.

Construction companies recorded the fastest rise in their average cost burdens for 18 months in November. This was linked to a general increase in raw material prices, as well as efforts among some suppliers to pass on higher staff costs.

Finally, around 43% of the survey panel predict an increase in business activity during the year ahead, while 21% forecast a reduction. Although this signalled upbeat business
expectations across the construction sector, the degree of optimism was down sharply since October and the lowest for 13 months. Anecdotal evidence from survey respondents
widely suggested that worries about the UK economic outlook and impact on business investment from rising employment costs had weighed on business optimism in November.

Tim Moore, economics director at S&P Global Market Intelligence, said: “The construction sector bucked the slowdown seen elsewhere across the UK economy in November,
according to the latest S&P Global PMI survey. Total industry activity once again expanded at a robust pace and there has been a clear acceleration in growth compared to that seen in the first half of 2024.

“However, the recovery in construction activity remains somewhat lopsided. Strengthening demand for commercial work and civil engineering projects contrasted with a sustained downturn in house building. Commercial construction activity expanded at the fastest pace for two-and-a-half years in November, while residential work declined at the steepest rate since June. Elevated borrowing costs and fragile client confidence meanwhile acted as a brake on new order growth in November, with the upturn in sales the slowest for five months.

“A loss of momentum for new work, alongside concerns about rising employment costs, resulted in weaker job creation and falling business optimism across the construction sector. The degree of positive sentiment regarding year-ahead growth prospects dropped to the lowest since October 2023. Many construction companies cited concerns about the near-term UK economic outlook and subsequent cutbacks to new projects.”

Jordan Smith, technical director at Thomas & Adamson, part of Egis Group, said: “There is an element of a reality check in the latest PMI report, with a real mixed bag in terms of indicators. The surge in optimism following the election has been tempered to a degree – particularly with the continued stagnation in housebuilding activity, which was a major part of the policy agenda. Interest rates remaining higher for longer, as well as fragile consumer confidence, will likely weigh on the sector’s prospects in the short term, until the government’s delivery plans are fully set out. We will be keeping a watchful eye on how this develops in 2025 and look forward to new residential sector opportunities in the new year with a number of clients.

“Despite relatively subdued economic conditions, there is still a lot to be positive about in today’s report and within the industry, in general – not least the faster upturn in overall construction output and rising commercial activity. We are engaged on and delivering a number of commercial refurbishment and retrofit schemes across the UK. The reported rise in demand and opportunities to tender also bodes well for the start of 2025, and this is something we are also seeing as a business with a number of projects secured for the new year. The fact remains that the headline index has been in positive territory for nine months running, and this bodes well as we move into 2025/26 and beyond.”

Brian Smith, head of cost management at AECOM, added: “The construction industry has enjoyed a period of growth during 2024 from the low point of last winter, and November’s rise is another clear indicator that the sector has broadly got to grips with managing its long-term cost challenges.

“As firms prepare for the full impact of the Budget next year, a further interest rate cut this month or early next year would provide a further boost to the industry. Falling rates should support the housing market in 2025 as well as much-needed private sector investment which, together with the government’s £100bn spending commitments, will be vital to growth.

“Should that investment translate into spades in the ground, it’s crucial that firms are prepared to deliver – from both a cashflow and labour perspective.”