FX.co ★ UK Construction Sector Contracts For First Time In 11 Months

The UK's construction sector experienced a contraction in January, marking the end of a ten-month expansion streak. Findings from an S&P Global survey released on Thursday highlight decreasing orders and rising cost pressures.

The Construction Purchasing Managers' Index slipped to 48.1 in January, down from 53.3 in December. This marks the first time the index has fallen below the 50.0 threshold since February 2024, indicating a contraction in the sector.

Survey participants attributed the slowdown to clients delaying decisions on major projects and broader economic uncertainties affecting business activity.

"UK construction output saw its first decline in nearly a year, as grim economic forecasts, high borrowing costs, and weak client confidence led to reduced workload," commented Tim Moore, Economics Director at S&P Global Market Intelligence.

House building saw its sharpest decrease since January 2024, and civil engineering followed suit, partly due to unseasonably wet weather. Commercial construction also reverted to a contractionary phase in January.

New orders recorded their first decline in twelve months, falling at the fastest rate since November 2023. Concerned about the economic outlook, clients were less inclined to make new sales inquiries, reflecting decreased confidence.

A sustained drop in new business led to a second consecutive monthly decline in purchasing activity.

On the cost front, the survey identified the steepest increase in input prices since April 2023. Sub-contractor charges rose more swiftly, with inflation reaching its highest level in 21 months.

Employment in the sector decreased for the first time since August 2024, although the decline was slight.

Business optimism hit its lowest point since October 2023, with respondents attributing the drop to weakened client sentiment following the Budget, diminished sales pipelines, and the effects of a sluggish domestic economy.