The continued decline in housebuilding during April has created a cause for concern amongst economists, despite the overall growth of the construction sector in April.

At 51.1 in April, the headline seasonally adjusted S&P Global/CIPS UK Construction Purchasing Managers’ Index® (PMI®) – which measures month-on-month changes in total industry activity – was up slightly from 50.7 in March and above the neutral 50.0 value for the third month in a row. 

The lowest cost inflation for almost two-and-a-half years, an improvement in supply conditions - with the best materials availability since September 2009 - and fewer instances of transport delays significantly supported the overall sector growth.

However, the latest reading signalled only a marginal overall expansion of construction activity, with growth described as “lopsided,” as housebuilding continued to decline at a sharp pace.

Rising volumes of commercial work and civil engineering activity helped to offset the steepest decline in residential construction output since May 2020.

Tim Moore, Economics Director at S&P Global Market Intelligence, which compiles the survey, highlighted the sector was continuing a “modest rebound” from the downturn seen at the turn of the year. 

“Commercial building work continued to outperform, helped by stabilising domestic economic conditions and a gradual rebound in business confidence,” he said.

“Civil engineering activity was also a driver of construction growth during April, with rising infrastructure work contributing to the best phase of expansion in this segment since the first half of 2022. 

“However, the return to growth for UK construction output appears worryingly lopsided as residential work decreased for the fifth successive month.”

He added extended delays on new housing starts continued as a result of elevated mortgage rates and weak demand. 

“While there have been some signs of a recent stabilisation in market conditions, this has yet to feed through to construction activity,” he said. 

“In fact, the latest reduction in residential building was the fastest since May 2020.”

Dr John Glen, Chief Economist at the Chartered Institute of Procurement & Supply (CIPS), said the mixed picture found in the UK construction industry last month represented “an economy still trying to recalibrate after being buffeted by the manifold challenges of political instability, lockdowns and supply chain pressures”. 

“The growth in the construction of commercial properties is welcome news, with the avoidance of a recession in the last quarter leading to clients being more willing to spend,” he said. 

“The significant easing of supply chain disruption, with delays reduced and materials more readily available, also helped to alleviate cost pressures on the sector. 

“However, the sharp decline in UK house building in April will be a cause for concern, as it becomes clear that the recent interest rate rises will continue to hamper consumer demand for some time to come. 

“With a further rate rise expected next week there will be concerns that things will get worse before they get better for UK house builders.”

Commercial building was the fastest-growing area of the construction sector in April (index at 53.9), with improving economic conditions helping to boost clients' willingness to spend. 

The rate of expansion was the second-strongest since October 2022, although survey respondents again cited a growth headwind from squeezed client budgets and elevated cost inflation. 

Civil engineering activity (index at 52.0) also picked up in April, supported by resilient pipelines of work on infrastructure projects. 

House building was by far the weakest-performing segment in April (index at 43.0).

New orders received by construction companies increased for the third consecutive month in April. 

Higher levels of new work were attributed to resilient client demand, especially for commercial building. 

Rising construction activity and forthcoming project starts contributed to a moderate increase in employment during April.

Construction companies anticipate a further increase in business activity during the year ahead, but the degree of confidence edged down to a three-month low. 

Around 44% of the survey panel forecast a rise in output in the next 12 months, while only 13% expect a fall. 

Survey respondents mostly commented on optimism due to resilient client demand. 

However, some firms expressed concern about the subdued housing market activity, rising interest rates, and the uncertain economic outlook.