Slump for UK builders eases in December on rate cut hopes – PMI

By William Schomberg

LONDON (Reuters) – Britain’s construction sector showed signs in December that it might have seen the worst of a slump caused by the steep climb in interest rates, a survey showed on Friday.

The S&P Global/CIPS UK construction Purchasing Managers’ Index (PMI) rose to 46.8 from November’s 45.5 but remained below the 50.0 growth threshold for a fourth month in a row.

Companies remained worried about Britain’s economic outlook, especially for commercial projects, Tim Moore, economics director at S&P Global, said.

Commercial construction activity shrank by the most since January 2021, hit by the Bank of England’s 14 back-to-back increases in borrowing costs to fight inflation which have taken its benchmark interest rate to the highest level in 15 years.

“However, expectations of falling interest rates during the months ahead appear to have supported confidence levels among construction companies,” Moore said.

Around 41% of firms which took part in the December survey saw business activity rising over 2024 while 17% forecast a decline, a contrast with overall negative sentiment a year earlier, S&P Global said.

House-building remained the biggest drag on the overall sector but the rate of decline was the least severe since July last year. Similarly, civil engineering activity shrank at a softer pace in December.

Input prices for the sector as a whole fell but were down less sharply than in November, when raw material costs declined at the fastest rate since July 2009.

The weakness in construction has contrasted with S&P Global’s measure of the far bigger services sector, which grew more strongly than expected last month.

The all-sector PMI – which combines the construction data with figures released earlier in the week for the services and manufacturing sectors – rose to 51.7 in December from 50.2 in November, its highest since June.

(Reporting by William Schomberg; Editing by Hugh Lawson)