UK Construction Sector Surges in Pre-Budget Boost for Starmer

The UK construction sector grew at its fastest pace in two-and-a-half years in September, a key survey showed in a boost for Prime Minister Keir Starmer after weeks of negative sentiment about the economy.

(Bloomberg) — The UK construction sector grew at its fastest pace in two-and-a-half years in September, a key survey showed in a boost for Prime Minister Keir Starmer after weeks of negative sentiment about the economy.

S&P Global said its headline PMI jumped to 57.2, up sharply from 53.6 in August. That was the fastest pace since April 2022 and significantly above the 53.1 median forecast in a Bloomberg survey of economists.

The “decisive improvement” was attributed to a combination of lower interest rates, domestic economic stability and strong infrastructure pipelines, with the sector seeing gains across the board. Cost pressures intensified, however.

The findings will be welcomed by Starmer and his Labour government, which has been battered by a series of surveys showing business and consumer confidence falling amid fears of tax rises and cuts to public-sector projects in the budget on Oct. 30. 

While some construction firms registered similar concerns last month, S&P said the sector as a whole was enjoying “rising confidence among clients and a post-election rebound in sales enquiries.” The PMI index is now well above the 50 level that divides expansion from contraction.

A gauge of housebuilding rose to its highest since March 2022, boosted by government plans to build 1.5 million new homes over the next five years to fix Britain’s housing crisis.

Other sectors reported even stronger growth, with civil engineering expanding at the fastest pace in over three years amid rising demand for infrastructure projects linked to energy security and renewables. Optimism remained high across the construction sector, which accounts for around 6% of the economy.

“Survey respondents cited rising sales enquiries since the general election, as well as lower borrowing costs and the potential for strong housebuilding demand as factors supporting business activity expectations in September,” said Tim Moore, economics director at S&P Global Market Intelligence.

The pickup came with a warning on the inflation pressures facing the sector, with input prices rising the most in 16 months as demand for raw materials rose and suppliers passed on wage increases.