Slowdown in Britain’s Construction Industry

LONDON (Reuters) – Growth in Britain’s construction industry slowed in August, despite the largest increase in homebuilding in nearly two years, according to a survey released on Thursday. This data adds to the evidence of easing inflation pressures.

The S&P Global UK Construction Purchasing Managers’ Index (PMI) dropped to 53.6 from 55.3 in July, falling short of the consensus forecast of 54.9 from a Reuters poll of economists.

Homebuilding Gains

Notably, the survey indicated that housing activity rose to its highest level since September 2022, a time when the former prime minister Liz Truss’s economic policy had caused significant disruption in the mortgage market.

However, the robust homebuilding growth was counterbalanced by a notable slowdown in the civil engineering sector, largely due to uncertainty surrounding future infrastructure projects, especially with finance minister Rachel Reeve’s budget announcement scheduled for October 30.

Overall Industry Outlook

Overall, the construction sector is currently in better shape compared to early 2024, aided by the Bank of England’s interest rate cut last month and the new Labour government’s commitment to construct 1.5 million new homes by the end of the current parliamentary term.

Tim Moore, economics director at S&P Global, remarked, “Another robust expansion of incoming new work was recorded in August, highlighting that new project starts are set to support a broader rebound in construction activity in the coming months.”

Costs for construction companies rose at a slower rate in August. In addition, other surveys released earlier this week indicated that Britain’s manufacturing and services sectors also experienced a reduction in inflation pressures.

The all-sector PMI, which includes manufacturing, services, and construction, increased to 53.8 in August from 53.3 in July, marking a four-month high.