Joe Sullivan, Partner at MHA, comments on today's S&P construction PMI data:
July’s construction PMI suggests the pace of contraction is easing but activity still remains well below the 50 threshold.
The sector continues to be hampered by procurement delays, project timing issues and uncertainty over funding.
The short-term picture remains difficult, particularly in infrastructure, where too many projects are still stuck between announcement, tender and contract award. But the longer-term pipeline is more encouraging. Demand linked to energy and utilities, grid capacity, data centres and defence remains strong, and infrastructure will need to do much of the heavy lifting if construction is to return to growth.
Greater political and funding certainty could help unlock schemes that have been held back. Planning reform may help over time, but the sector needs more than incremental change. The challenge is not a lack of policy direction, but the pace at which investment turns into contracts, mobilisation and activity on site.
Housing remains under pressure, hit by affordability constraints, planning delays and fragile buyer confidence. Commercial activity is arguably the least weak part of the market, supported by industrial and logistics related investments, with hopes that conditions will start to stabilise in the coming months.
The Budget will be a key moment. Until there is greater clarity on funding, clients and contractors are likely to remain cautious about committing to major schemes.
Cost pressure is also sharpening the focus on value for money. Rescoping or redesigning schemes can delay procurement further, while fixed-price contracts remain a hard sell for contractors unwilling to absorb higher risk and thinner margins.
Overall, the near-term outlook for the sector remains weak but survey respondents are feeling more confident than they have in previous months. If funding clarity improves and procurement delays ease, infrastructure could still provide the momentum needed for a broader recovery.
