Red Light Warning For Construction

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“The warning lights on the construction industry dashboard have switched from amber to red,” according to Josh Ward-Jones, a director of Bloom Building Consultancy – which flies in the face of the most recent Glenigan Construction Index.

“In fact there’s precious little to cheer about in January's PMI data, which shows a clean sweep of negative trends. Both output and orders are down, cost pressures are rising and sentiment is sliding.

“For much of 2024, the weakness of the housebuilding sector was offset by the buoyancy of commercial construction. No longer. January’s headline figure slipped into contraction territory for the first time since last February.

No pipeline

“The pipeline of new work is starting to get patchy too,” adds Ward-Jones. “While the decline in new orders was modest, as the first reversal in 12 months, it cannot be dismissed as inconsequential.

“Many are blaming the slowdown in demand on the hit to business confidence seen in the wake of last October’s Budget. Companies worried about their business prospects and the impact of April’s jump in Employer NI Contributions have been quick to pause or rein in capital spending.

 “This slowdown is being reflected in construction firms’ sentiment too. The PMI survey found that just 38% of contractors expect business activity to increase over the next year – the lowest level since October 2023. As recently as a month ago, the figure stood at almost half.”

Repair, maintenance, improve - positive

“Yet while there has been a cooling in new construction work, demand for refurbishment and upgrade work remains brisker. And though cost pressures are eating into contractors’ margins, the Bank of England could offer some relief as it continues to cuts interest rates.

"Cheaper finance costs would be a welcome salve for an industry which has made a fragile and cautious start to 2025.”

Picture: Josh Ward-Jones of the Bloom Building Consultancy has issued a red light warning for the construction sector.

www.bloombc.co.uk

S&P Global UK Construction PMI

Article written by Cathryn Ellis
12th February 2025

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