UK construction slips to near 3-year low but confidence rises - PMI

General view of apartments near Wandsworth Bridge in London

By William Schomberg

LONDON (Reuters) - Britain's construction sector had its worst month in almost three years in January as rising borrowing costs hit house-building hard but builders turned more confident about the outlook for 2023, a survey showed on Monday.

The S&P Global/CIPS Purchasing Managers' Index (PMI) for the construction sector dropped to 48.4 from 48.8 in December, hitting its lowest level since May 2020.

Britain's construction sector lost its momentum during the second half of 2022 in the face of higher interest rates. The Bank of England last week raised borrowing costs to 4%, their highest since 2008, in an attempt to tackle the surge in inflation.

Monday's survey showed a sharp fall in house-building while civil engineering work and commercial projects also declined.

But the construction PMI's gauge of business expectations bounced back to its highest since July last year after touching its lowest level since May 2020 in December.

Tim Moore, economics director at S&P Global Market Intelligence, said some firms saw concrete signs of a turnaround in new sales enquiries at the start of 2023.

"Other construction companies simply noted gradual improvements in the general economic outlook and hoped that confidence would return at a later stage this year," he said.

A measure of input cost inflation edged up slightly from December's two-year low, but the new orders gauge was up only fractionally from December's two-and-a-half year low.

S&P Global's all-sector PMI - which includes services and manufacturing data released last week as well as Monday's construction number - slipped to 48.5 in January from 49.0 in December, its second-lowest reading in two years.

(Reporting by William Schomberg; Editing by Toby Chopra)