Josh Ward-Jones, director of Bloom Building Consultancy, commented: “The warning lights on the construction industry dashboard have switched from amber to red.
“In fact, there’s precious little to cheer about in January’s PMI data, which shows a clean sweep of negative trends. Both output and orders are down, cost pressures are rising and sentiment is sliding.
“For much of 2024, the weakness of the housebuilding sector was offset by the buoyancy of commercial construction. No longer. January’s headline figure slipped into contraction territory for the first time since last February.
“The pipeline of new work is starting to get patchy too. While the decline in new orders was modest, as the first reversal in 12 months it cannot be dismissed as inconsequential.
“Many are blaming the slowdown in demand on the hit to business confidence seen in the wake of last October’s Budget. Companies worried about their business prospects and the impact of April’s jump in Employer NI Contributions have been quick to pause or rein in capital spending.
“This slowdown is being reflected in construction firms’ sentiment too. The PMI survey found that just 38% of contractors expect business activity to increase over the next year – the lowest level since October 2023. As recently as a month ago, the figure stood at almost half.
“Yet while there has been a cooling in new construction work, demand for refurbishment and upgrade work remains brisker. And though cost pressures are eating into contractors’ margins, the Bank of England could offer some relief later today if it cuts interest rates as expected.
“Cheaper finance costs would be a welcome salve for an industry which has made a fragile and cautious start to 2025.”
Jordan Smith, technical director at Thomas & Adamson, part of Egis Group, said: “The overall construction PMI reading falling into negative territory for the first time in nearly a year is not unexpected – accelerating cost inflation, weaker economic conditions, and higher borrowing costs have slowed the sector’s recovery. And, despite policy support for the likes of housebuilding and civil infrastructure, these are seeing some of the weakest levels of activity on the ground.
“Still, we expect to see further detail about the government’s spending plans in the coming months and would hope that this will provide much-needed stimulus to the sector – particularly areas that have struggled recently. It is also worth noting that, on balance, more firms continue to predict a rise in activity during 2025 than a fall.
“Similarly, we have experienced a strong start to 2025, with a pipeline of projects emerging throughout the year across various sectors. So, while the short-term picture remains a little unclear, there are good reasons to remain optimistic about the medium and long-term prospects for the construction sector in the UK.”
To read the S&P Global UK Construction PMI®, Business activity declines for the first time since February 2024 report in full visit: https://tinyurl.com/yc79nnmp
