© Reuters. Workers are seen as the sun sets behind a construction site in London, Britain, January 21, 2020. REUTERS/Henry Nicholls/File Photo
LONDON(Reuters) – Confidence in Britain’s construction sector rose marginally in late 2023, helped by the prospect of interest rate cuts, according to a survey published before the Bank of England is expected to hold rates at their highest level since 2008.
The Royal Institution of Chartered Surveyors (RICS) said the outlook for the year ahead was more upbeat, with its headline workloads measure climbing to 12% from 6%.
It said that a net balance of 8% of survey respondents reported a fall in activity in the three months to December, less downbeat than the 10% reporting a decline in the three months before.
“While the UK’s construction sector remained fairly subdued at the tail end of 2023, belief in a rate cut in 2024 appears to be supporting greater expectations for the future,” the report said.
RICS said there was a “clear divergence” between sectors, with home-building contracting further while infrastructure activity continued to grow.
Despite some optimism spurred by lower mortgage rates, Britain’s housing market has been slow to recover from the long run of interest rate increases by the BoE and the hit following the “mini-budget” crisis of late 2022.
The BoE is expected to leave interest rates on hold at a 15-year high of 5.25% later on Thursday and possibly signal a change in its rate stance after 14 back-to-back increases between December 2021 and August 2023.
Although pressures around skills shortages persisted in the fourth quarter, RICS said survey respondents were anticipating a rise in employment in the next 12 months.
“Supported by the prospect of easing interest rates later this year, overall workloads are anticipated to rise, with respondents anticipating this pick-up will be accompanied by a rise in employment levels across the industry,” Tarrant Parsons (NYSE:), senior economist at RICS said.
The most recent official data showed construction output fell 0.2% in November.