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Construction activity continues to pick up, but outlook remains grim

Activity continued to pick up in the UK’s construction sector last month, bucking trends seen elsewhere, as it recovered from two-year lows seen during the summer.

The influential Purchasing Managers Index found that supply shortages have eased, but costs, especially energy costs, remain high.

The construction sector was given a PMI score of 53.2 in October, up from 52.3 in September. The scores are above 50, so are considered to show growth in the construction industry.

October’s figure is also the highest for five months, as the sector faced a rough summer, bottoming out at a 26-month low of 48.9 in July.

The survey, run by S&P Global and the Chartered Institute of Procurement & Supply, found that commercial building companies were performing the best at the moment.

Residential builders, meanwhile, managed to grow, albeit by a slim margin, while the civil engineering sector shrunk for the fourth month in a row.

“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,” said Tim Moore, economics director at S&P Global Market Intelligence.

“Commercial work was the best-performing area of activity as delayed projects moved forward, while increased house building also provided a positive contribution to overall workloads.”

But he warned that it might be more difficult for the sector to grow in the coming months. It is facing higher borrowing costs, economic uncertainty and cost constraints.

All of these impacted companies’ order books in October, leading to the first reduction in new work since May 2020.

“Business optimism regarding the year ahead slumped in October and was by far the weakest since the early pandemic months,” Mr Moore said.

Businesses said that their customers were cutting back on non-essential spending. Some said that there had been an uptick in spending on green energy projects, potentially in response to high gas prices.

This, alongside planned infrastructure spending and niche markets, could “help to offset the UK economic headwinds,” Mr Moore said.