Construction PMI: Overtrading risk remains despite increase in construction activity

According to the latest PMI data by S&P and CIPS, the headline construction PMI for April increased to 53, up from 50.2 in March and continuing the upward trend of the previous month. 

This latest uptick was driven by commercial activity jumping to 53.9, with further rises in civil engineering activity and future activity, increasing to 53.6 and 69.4, showing that business and consumer confidence are returning. 

Kelly Boorman, national head of construction at RSM UK, said: 'The monthly increase in the PMI to 53 in April highlights things are moving in the right direction for construction, with headline growth for the second consecutive month. This latest uptick was driven by increases to civil engineering activity and future activity, which reflects industry sentiment as many businesses are reporting that their pipelines are full, having secured work for 12 months ahead and previously stalled infrastructure projects are finally coming to fruition. Additionally, commercial activity contributed to the monthly increase, rising to 53.9, the highest level since August 2023 and a sign that many businesses are pushing forward to assume flexible, hybrid and sustainable workspaces. 

'However, housing activity fell slightly to 47.6, but it remains ahead of April 2023 figures. Housebuilders are poised for an increased volume throughout the year as interest rates fall, which will lead to consumer confidence returning to the market, especially as there has been an uptick in mortgage approvals. This, coupled with ongoing larger educational and healthcare projects, will help to stimulate the housing market. With further investment also outlined by pensions funds into UK infrastructure projects over the next 12 months, this too will ensure strong pipelines and better margins for long-term growth.'

She added: 'But, the availability of subcontractors remained tight in April at 55.9, with delays and continual changes to mobilisation of projects causing further challenges for the supply chain and its workforce. The unstable environment makes it difficult for businesses to predict their working capital requirements, and subcontractors are carefully considering their commitment to infrastructure projects. Although the market is generally optimistic, a general election on the horizon will add further instability for infrastructure projects, making it difficult to plan ahead. As the industry already facing a major skills shortage, many businesses could be at risk of overtrading and unable to deliver on projects, which may lead to more insolvencies.'