Market News

(Bloomberg) -- UK construction output grew at the fastest pace in more than two years, boosted by the culmination of the election that brought to power a Labour government promising to spur building.

S&P Global’s Construction Purchasing Managers’ Index rose sharply to 55.3 in July from 52.2 the previous month. Scores above 50 signal growth. It was well above the reading of 52.5 expected by forecasters and the fastest increase in activity in 26 months.

The figures are a lift for Keir Starmer’s government, which embarked on a blitz of planning reforms aimed at unlocking construction following Labour’s landslide election victory on July 4. 

The party’s manifesto included a promise to overhaul the onerous planning system and an ambitious target to build 1.5 million homes over five years. The sector will likely benefit further from the Bank of England’s decision last week to ease interest rates from a 16-year high, a level that had squeezed the housing market and the finances of construction companies. 

“The election-related slowdown in growth seen in June proved to be temporary,” Andrew Harker, economics director at S&P Global Market Intelligence, said Tuesday. “Firms saw the strongest increases in new orders and activity since 2022 as paused projects were released amid reports of improved customer confidence.”

The survey showed that the uptick was driven by new orders jumping at the quickest pace since April 2022.

Housebuilders saw the fastest growth in almost two years, a rebound after the downturn in the UK property market prompted caution among construction firms. Civil engineering saw growth quicken to the fastest in close to 2 1/2 years.

However, the stronger demand also came with mounting inflation risks. Higher demand led to input cost inflation picking up to the joint-fastest in 14 months. Hiring accelerated to the fastest in a year, threatening to boost wage growth in the sector.

--With assistance from Mark Evans and Joel Rinneby.