The UK construction sector continued to grow at the end of the second quarter, although the overall expansion slowed due to a renewed decline in housing activity. A slower rise in new orders was observed, partly attributed to election uncertainty, but job creation increased. Input cost inflation quickened from May but remained moderate.

The headline S&P Global UK Construction Purchasing Managers’ Index (PMI) – a seasonally adjusted index tracking changes in total industry activity – registered 52.2 in June, down from 54.7 in May. Staying above the 50.0 no-change mark for the fourth consecutive month, this reading indicated a sustained improvement in UK construction activity, though the growth pace softened from the previous month.

Commercial activity continued to drive growth, increasing significantly in June, although the expansion rate eased from May’s two-year high. Civil engineering activity also rose, albeit modestly. Housing was the only category with a decline, with output dropping solidly after a first increase in 19 months in May.

Anecdotal evidence suggested the overall activity expansion was due to securing new contracts in June. New orders data showed a fifth consecutive monthly rise amid successful tendering and increased client activity. However, the growth rate in new business was modest and the slowest since February, with some respondents citing election-related uncertainty as a factor in slower new work inflows.

Despite slower new order growth, construction firms increased their ageing workforce for the second month in a row. The job creation rate was solid and the sharpest since August last year. 

Companies also expanded their use of sub-contractors at a solid pace, extending the growth sequence to three months. 

Sub-contractor availability continued to improve, with the latest supply increase the largest in nine months. Rising new orders led firms to boost their purchasing activity for the second consecutive month, with the expansion rate similar to May’s.

Supply chains showed little pressure, with vendor delivery times shortening for the sixteenth consecutive month. Input costsrose slightly again in June as some suppliers limited price increases to secure new business. The inflation rate ticked higher due to rising costs for some raw materials but remained well below the series average. 

Sub-contractor rates increased modestly at the slowest pace in four months. Confidence in securing new contracts over the next year supported continued optimism for construction activity in June. Expectations that interest rates will decrease also contributed to positive sentiment. More than half of respondents anticipated an increase in construction activity, with confidence levels similar to those seen in May.