Construction industry 'stabilises' as builders feel most optimistic in two years

06 March 2024 , 14:37

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The construction industry showed signs of stabilising last month (Image: PA Wire/PA Images)

The UK's building industry is starting to steady itself after a turbulent time with builders feeling more hopeful than they have in over two years, says a new report.

But even though things are looking up, companies are letting go of workers quicker than they have since 2020 because not as many houses are being built. The latest S&P Global/CIPS construction purchasing managers' index (PMI) for February was 49.7, a bit better than January's 48.8.

This number is just under 50 which is the line between the building industry doing well or not so well. Experts thought the score would be 49 for February. The survey found that things got a bit better for building homes because there were more orders from customers.

But building places like offices and warehouses didn't do as well with builders saying people didn't want to start new projects or spend too much money. Tim Moore of S&P Global Market Intelligence, said: "This was the best performance for the construction sector since August 2023 and the forward-looking survey indicators provide encouragement that business conditions could improve in the coming months."

Businesses are feeling more hopeful than they have since January 2022, according to a PMI survey. It found that construction companies are expecting customer demand and the economy to get better this year. "However, a protracted downturn in activity has made construction companies cautious about their employment numbers," Mr Moore added.

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He added: "Staffing levels dropped for the third time in the past four months and the latest round of job shedding was the steepest since November 2020." The survey found that pressure to raise staff wages combined with less work led some firms to take steps to cut costs, or choose not to replace staff leaving their jobs.

Rob Wood, chief UK economist for Pantheon Macroeconomics, said the expectation of a fall in interest rates, which have pushed up the cost of borrowing, has "breathed life into housebuilding". He said: "House-buyers returning to the market as expectations of interest rate cuts have grown helped construction output to stabilise in February. Builders' surging confidence in the outlook suggests construction output will grow again soon."

Lawrence Matheson