According to the latest Business Barometer from Lloyds, construction sector confidence rose by 10 points to 56% in July
These latest construction sector confidence figures track above the 12-month average of 47%. This was driven by stronger customer demand, improving financial conditions and industry-specific improvements.
Max Jones, director and head of construction at Lloyds, explained: “The latest rise in confidence suggests construction firms are becoming more willing to plan beyond the next project.
“After a period of uncertainty, it’s encouraging to see that firms are beginning to invest in people and the capacity they’ll need to support future demand, signalling a sector that’s looking ahead rather than reacting to today’s market conditions.”
Stronger customer demand is the main reason for increased construction sector confidence
More than half of the construction firms surveyed (54%) said that stronger customer demand was their main reason for increased confidence in the economy.
This was followed by improving interest rates and financial conditions, cited by 38% of firms.
More than two-thirds (68%) of construction firms expect their business activity to increase in the coming year, up slightly from 67% in June.
Moreover, just under two-thirds (65%) are planning to increase their staff levels over the same period, up from 55% in June.
End of the Middle East conflict has increased optimism across the country
Overall, UK business confidence rose five points in July to 49%, hitting a four-month high.
This was driven by an increase in economic optimism, reflecting the decline in global energy prices, the Bank of England holding interest rates and the announcement of an interim peace agreement in the Middle East at the time of the survey.
Optimism in the wider economy rose 11 points to 42%, compared to a 12-month average of 37%. Of those surveyed, 59% said they were optimistic (up four points from June) in the wider economy, while those who felt pessimistic decreased by seven points to 17%.
The main factors cited by firms who felt more positive this month were stronger customer demand, improving interest rates or financial conditions and better economic news.
Businesses’ own trading outlook remained unchanged at 56% in July, compared to a 12-month average of 57%.
65% of firms (up one point from June) expect stronger output over the year ahead, while those expecting weaker activity increased one point to 9%. Among firms expecting stronger activity, the main factors were stronger customer demand, increased investment in capacity or tech and improved supply chain conditions.
The road ahead
“It’s encouraging to see business confidence reach its highest level in four months, driven by a significant improvement in economic optimism. While challenges remain, these results suggest many businesses are feeling more optimistic about the opportunities ahead,” said Amanda Murphy, CEO for Lloyds Business and Commercial Banking.
She concluded: “Businesses have remained remarkably resilient in recent months, with many focusing on investing in their future, improving productivity and making sure they’re well placed to respond as market conditions change.
“The stronger confidence we’re seeing among smaller businesses and firms focused on the domestic market is particularly encouraging, suggesting more businesses are starting to see opportunities for growth and investment.”
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