Activity in Britain’s house building sector is at its highest level since November 2022, according to data from the closely watched S&P / CIPS PMI series of economic indicators.
The purchasing managers index (PMI) score for residential construction was 49.8 in February, up from 44.2 the month before. A PMI score above 50 indicates that a sector is experiencing growth, while a score below points to contraction.
S&P economics director Tim Moore said improved market conditions had led to improved activity in residential construction, as well as in commercial and civil engineering. As a result, the PMI score for the construction sector as a whole increased from 48.8 to 49.7 last month, its highest level in seven months.
Moore 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.”
S&P and the Chartered Institute of Procurement & Supply said that 51% of businesses believe that they will see increased activity levels this year, while just six percent forecast a decline. This is the highest level of business confidence from construction companies seen in 2 years, which they attributed to new project starts, signs of improved consumer demand and expectations of interest rate cuts this year.
Martin Beck, chief economic advisor to the EY ITEM Club think tank, said that conditions for the construction sector should improve further when the Bank of England starts cutting interest rates.
“The fact that housebuilding activity saw the biggest turnaround in February’s survey suggests that the decline in mortgage rates since last summer and a recovery in housing market activity are starting to make their presence felt,” he said.
“With the Bank of England likely to start cutting interest rates in the next few months, what has been one of the key headwinds facing the construction sector should ease further, loosening credit conditions and reducing debt costs and investment hurdle rates.”
Although construction companies are increasing confident, S&P and the CIPS said that employment in the sector fell for the third month in four, with the numbers of jobs lost at their highest level since November 2020.
