Output stays in reverse but housing jump fuels optimism for coming year

Output edged up last month but remained in negative territory for the sixth successive month, a bellwether index has said.The S&P Global/CIPS UK construction Purchasing Managers’ Index (PMI) said the figure for February was 49.7, up from 48.8 the month before, but below the 50 no change mark.But there were some green shoots for housing with the sector posting a score of 49.8, up from 44.2 and the highest level since November 2022.The report added: “Survey respondents suggested that improving market conditions had gradually contributed to a stabilisation of residential construction work.”The commercial sector, though, was dogged by clients being reluctant to press the start button amidst worries about affordability.S&P economics director Tim Moore said: “A stabilisation in house building meant that UK construction output was virtually unchanged in February. This was the best performance for the construction sector since August 2023 and the forward-looking survey indicators provide encouragement that business conditions could improve in the coming months.”New orders rose for the first time since last summer but firms remain worried bout staffing levels. “A protracted downturn in activity has made construction companies cautious about their employment numbers,” Moore added.Brendan Sharkey, construction and real estate specialist at accountants MHA, said: “The potential fall in interest rates over the summer will psychologically help kickstart the sector but right now our clients are telling us that they are frustrated by the lack of a coherent strategy from government that would give them a sense of direction.”Optimism, however, was at its highest level for two years with survey respondents pinning their hopes on a turnaround in client demand due to looser financial conditions and more favourable underlying economic prospects.Beard director Jamie Harwood said his firm’s orders were at a record high and added: “Even with some of the macro-pressures that still remain, customers are finding the confidence to commit to projects – buoyed by the prospects of the year ahead. We’ve certainly seen this on the ground at Beard.”But Kelly Boorman, national head of construction at restructuring specialist RSM UK, warned: “The industry is finding it difficult to make long-term commitments to projects due to workforce challenges. While housing activity saw further improvement, the headline PMI is still below 50 for the sixth consecutive month, showing that sector activity is still subdued.”The survey also said supply condition had improved last month with demand remaining relatively subdued.