Activity in the UK construction sector continued to grow in October, but new orders fell for the first time in more than two years, according to a survey released on Friday.
The S&P Global/CIPS construction purchasing managers’ index rose to 53.2 from 52.3 in September, making the highest reading since May and coming in above expectations of 50.5. A reading above 50.0 indicates expansion, while a reading below signals contraction.
Higher levels of business activity were attributed to a combination of new project starts and strong pipelines of unfinished work.
Commercial building was the best-performing category, with output growth reaching a five-month high. Meanwhile, residential work also expanded, albeit at a softer pace than in September, but civil engineering activity fell for the fourth month in a row.
The new orders index declined to 49.4 in October from 50.1 the month before, coming in below 50.0 for the first time since May 2020 and suggesting that rising borrowing costs could be starting to impact demand.
Tim Moore, economics director at S&P Global Market Intelligence, said: “Construction output has staged a modest recovery after the downturn seen through much of this summer, with growth hitting a five-month high in October.
“However, the forward-looking survey indicators highlight that growth will be harder to achieve in the coming months as rising borrowing costs, economic uncertainty and cost constraints all had a negative influence on order books in October. The reduction in total new work was the first since May 2020 and this fuelled increased concerns about longerterm tender opportunities.”
Moore said business optimism about the year ahead slumped and was by far the weakest since the early months of the pandemic.
“Construction firms cited concerns about a broad-based decline in client demand due to cutbacks on non-essential spending among clients, although some noted that growth linked to green energy projects, planned infrastructure spending and success in niche markets could help to offset the UK economic headwinds,” he said.
