Results from the bellwether S&P Global UK Construction Purchasing Managers’ Index in January showed a strong improvement in business activity expectations as the main index registered 48.8 – up from 46.8 in December and the highest reading since August 2023.

But the index remained below the crucial 50.0 no-change threshold for the fifth month running and signalled a moderate decline in total industry activity.

Around 51% of the survey panel forecast a rise in business activity during the year ahead, while only 12% predict a decline – the highest level of business optimism since January 2022.

Tim Moore, Economics Director at S&P Global Market Intelligence, which compiles the survey said: “UK construction companies seem increasingly optimistic that the worst could be behind them soon as recession risks fade and interest rate cuts appear close on the horizon.

“The prospect of looser financial conditions and an improving economic backdrop meant that business activity expectations strengthened to the highest for two years in January.

“Moreover, there were again signs that customer demand is close to turning a corner as total new orders fell to the smallest extent for six months.

“Relatively subdued pipelines of new work nonetheless resulted in lower levels of construction output for a fifth successive month in January. House building remained by far the weakest-performing category, despite the rate of decline easing to its slowest since March 2023.

“Meanwhile, higher prices paid for imported items contributed to a rise in overall cost burdens for the first time since last September. However, there were still signs of space capacity across the construction supply chain as vendor delivery times shortened again at the start of 2024 and subcontractor availability increased at a robust pace.”