Merchant Exchange
Confidence among UK construction firms rose sharply in July, with more businesses planning to increase activity and staffing levels over the year ahead, according to the latest Lloyds Business Barometer.
Construction business confidence increased by 10 points to 56% in July, moving above the sector’s 12-month average of 47%.
The latest figures, based on responses from 186 construction firms surveyed during the first half of July, suggest the sector is becoming more positive about the outlook, with stronger customer demand emerging as the leading driver of optimism.
More than half (54%) of construction businesses said stronger customer demand was the main reason for their positive outlook. A further 38% pointed to improving interest rates and financial conditions.
The improved confidence is also translating into expectations for increased activity and employment.
Almost seven in 10 (68%) construction firms expect their business activity to increase over the next 12 months, up slightly from 67% in June.
Meanwhile, 65% of firms said they plan to increase staffing levels over the coming year, a significant rise from 55% in June.
Max Jones, Director and Head of Construction at Lloyds, said the latest figures indicated that businesses were becoming more prepared to plan beyond immediate projects.
“After a period of uncertainty, it’s encouraging to see that firms are beginning to invest in people and the capacity they’ll need to support future demand, signalling a sector that’s looking ahead rather than reacting to today’s market conditions.”
UK business confidence also rises
The construction sector’s improved outlook comes as overall UK business confidence climbed five points in July to 49%, reaching its highest level in four months.
Economic optimism was a key factor behind the increase, rising 11 points to 42% and moving above its 12-month average of 37%.
Lloyds said the improvement reflected a combination of factors, including cooling global energy prices, the Bank of England holding interest rates and the announcement of an interim peace agreement in the Middle East at the time of the survey.
Among the businesses surveyed, 59% said they were optimistic about the wider economy, up four points from June, while the proportion feeling pessimistic fell seven points to 17%.
Stronger customer demand, improving interest rates and financial conditions, and better economic news were among the main reasons cited by businesses feeling more positive.
Businesses’ own trading outlook remained unchanged at 56% in July, broadly in line with its 12-month average of 57%.
Overall, 65% of businesses expect output to strengthen over the next year, while only 9% anticipate weaker activity.
For those expecting growth, stronger customer demand, increased investment in capacity or technology, and improved supply chain conditions were identified as the main drivers.
Amanda Murphy, CEO for Lloyds Business and Commercial Banking, said the results showed businesses remained resilient despite ongoing challenges.
“It’s encouraging to see business confidence reach its highest level in four months, driven by a significant improvement in economic optimism. While challenges remain, these results suggest many businesses are feeling more optimistic about the opportunities ahead.”
She added that businesses were continuing to focus on investment, productivity and preparing for changing market conditions, with stronger confidence among smaller and domestically focused firms particularly encouraging.
For the construction sector, the combination of rising confidence, expected increases in activity and a sharp increase in planned recruitment points to a more positive outlook for the months ahead.
