May’s construction PMI has revealed that activity slowed at the sharpest pace in six months and saw a steep fall in new work
May’s construction PMI fell to 38.2 from 39.7 in April, its lowest level since May 2020, when the COVID-19 pandemic halted many projects.
This steep decline comes as economic uncertainty and rising inflation triggered by the Iran war led to a steep fall in construction projects
Jordan Smith, regional director at Egis UK, stated: “May’s PMI data highlights another challenging month for the UK construction sector, with activity declining across all major areas and output falling at its fastest rate outside of the pandemic period since 2009.
“Rising energy, fuel and transportation costs are continuing to drive inflationary pressures across the supply chain, while shipping delays and material shortages are creating additional challenges for project delivery.”
How political conflict impacts UK construction activity
Building firms in the S&P survey reported site delays, fewer tender opportunities, and a lack of demand caused by the Middle East conflict as well as political uncertainty in Britain.
The pace of decline was greatest for residential housebuilding and smallest for commercial work such as shops and offices.
Construction companies said their costs rose at the fastest pace since June 2022, after Russia’s full-scale invasion of Ukraine, driven by rising costs for fuel, energy and transport.
Businesses also reported the most widespread delays in shipping times since December 2022, in part due to the closure of the Strait of Hormuz.
“There’s been every sign that the construction sector is beginning to build stronger momentum recently, so this downturn is disappointing to see,” commented Paul Atkinson, restructuring advisory partner at FRP.
“The slowdown reflects the continued pressure created by funding costs, competition for work and wider economic uncertainty.”
Upcoming energy projects raise hopes for increase in productivity
Despite negative figures plaguing May’s construction PMI, upcoming energy sector and power network projects were viewed as a bright spot for infrastructure work.
“May’s fall shows the UK’s construction sector is still facing pressures, with elevated energy and fuel costs impacting projects. But below the headline figure, demand is still being supported by a pipeline of infrastructure work in areas such as energy, roads and rail, and water,” said Max Jones, director and head of construction at Lloyds.
“While ongoing uncertainty weighs on output, many firms are staying focused on current work and planning for future growth.”
He added: “Companies are also continuing to invest in skills, so they are ready for new opportunities linked to cleaner energy and growing areas of importance such as defence.”
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