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According to the latest PMI data by IHS Markit and CIPS, the headline construction PMI saw a surprising increase to 52.3 in September 2022, up from 49.2 in August, which saw the first rebound since February.
The latest rise in construction PMI was driven by increases in commercial, housing and civil engineering activity, as well as the availability of subcontractors. However, looking ahead to Q4 2022, the knock-on impact of soaring energy prices and inflation will be seen more strongly, indicating that the industry will be hit by the first signs of the recession.
Kelly Boorman, partner and national head of construction at leading audit, tax and consulting firm RSM UK, said: “The latest figures for September show a surprising increase in construction PMI, however, will this be a false uplift which we’ll start to see unwind in the next few months? Although there were rises in commercial, housing and civil engineering activity, this is likely due to contracts coming to an end in Q3 2022.
“In addition, new orders fell slightly, which will weaken business confidence. Energy prices, inflation and labour shortages will make it difficult to capitalise on the pipeline of work.”
She added: “Future activity also fell further in September from 60.6 to 58.2, and with a growing number of contractors entering administration, targeted support is needed from Liz Truss and newly appointed construction minister Jackie Doyle-Price to help businesses navigate economic headwinds, retain workers, and ultimately stay afloat.
“To combat these financial challenges, the government measures outlined in the mini-budget bring welcome news for the construction industry and other energy-intensive businesses; with corporate tax frozen at 19% and the annual investment allowance remaining at £1m, alleviating some pressure and facilitating investment for growth.”
