Commercial work drives UK construction sector growth but housebuilding drags

Growth in the UK’s construction sector picked up pace last month, as stronger demand for office building and infrastructure work helped offset sluggish house building, according to new data.

The latest S&P Global construction purchasing managers’ index (PMI), watched closely by economists, scored 55.2 in November, up from 54.3 in October.

Any reading above the 50 threshold indicates that activity in the industry is increasing, while anything below means it is shrinking.

The sector “bucked the slowdown seen elsewhere across the UK economy”, according to Tim Moore, S&P Global Market Intelligence’s economics director.

It follows figures showing that the country’s services sector – the biggest driver of economic output- came “close to stalling” in November because of companies slowing hiring and making cutbacks over worries about costs.

And the downturn facing the manufacturing sector also worsened amid heightened fears over the economic outlook.

The construction industry, however, was bolstered by the strongest rise in commercial work – such as offices, shops and warehouses – for two-and-a-half years.

Businesses reported seeing improving customer demand and new opportunities to bid for projects, despite subdued economic conditions.

Civil engineering activity, which refers to infrastructure projects such as roads, water systems and railways, also grew in November, albeit at a slower pace than previous months.

“However, the recovery in construction activity remains somewhat lopsided,” Mr Moore said.

“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.”

Housebuilders continued to see higher borrowing costs and fragile consumer confidence weigh on demand, according to the survey.

There were also some reports that political and economic uncertainty linked to the autumn Budget, which was unveiled at the end of October, had affected construction firms’ customers.

“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,” Mr Moore added.