IN Brief:
- Construction confidence reached 56%, compared with a 12-month sector average of 47%.
- Overall UK business confidence rose five points to a four-month high of 49%.
- Stronger sentiment must still convert into secured orders, viable projects, and work beginning on site.
Confidence among UK construction businesses rose by ten points to 56% in July, moving nine points above the sector’s 12-month average, according to the latest Business Barometer from Lloyds Banking Group.
The increase was attributed to stronger customer demand, improving financial conditions, and industry-specific improvements. Construction recorded one of the largest sector movements during the month, while manufacturing confidence rose by 14 points to 47% and services increased by four points to 49%.
Across the economy, overall business confidence reached a four-month high of 49%, five points higher than in June and two points above the 12-month average. The index combines companies’ expectations for their own trading performance with their view of the wider economy.
Economic optimism rose by 11 points to 42%, compared with a 12-month average of 37%. Fifty-nine per cent of respondents were more optimistic about the economy, while 17% were pessimistic. Businesses identifying stronger prospects most frequently cited customer demand, improving interest rates or financial conditions, and better economic news.
The trading outlook was less emphatic. It remained unchanged at 56%, one point below its 12-month average, with 65% of businesses expecting stronger output during the following year and 9% anticipating weaker activity. The gap between economic optimism and companies’ own trading expectations suggests that July’s improvement was driven partly by a calmer external backdrop rather than a sudden expansion in order books.
That distinction is particularly relevant to construction, where confidence can improve well before workload reaches sites. Lower financing pressure may revive development appraisals, strengthen buyer demand, or encourage clients to restart procurement, but projects still have to pass through planning, design, funding, tendering, and mobilisation before they contribute to output.
The July reading therefore sits alongside, rather than displaces, harder evidence on project starts, tender volumes, and contractor workloads. Sentiment can influence recruitment, plant investment, bid activity, and decisions on work in progress, yet it remains an expectation measure. A company can feel less pessimistic about the economy while still managing a thin near-term pipeline.
Regional confidence also varied sharply. Seven of the UK’s 12 nations and regions recorded increases, led by the North East at 75%, Yorkshire and the Humber at 61%, and the West Midlands at 57%. The East of England posted the largest monthly rise, climbing by 30 points to 53%, while sentiment fell in the South West, Scotland, Northern Ireland, and London.
Construction markets are assembled from local pipelines, so those differences carry practical consequences. Housebuilding sales, public-sector capital programmes, industrial development, commercial investment, and infrastructure workloads do not move uniformly across the country. Contractors exposed to several regions may see improving prospects in one area while tender competition intensifies elsewhere.
Smaller businesses with turnover below £1m reported an 11-point increase in confidence to 48%. That group includes many specialist contractors, trades, consultants, and local suppliers whose workload can react quickly to changes in repair, maintenance, fit-out, and small-project demand. It is also more exposed to delayed payment, gaps between contracts, and limited working-capital headroom.
Domestic businesses recorded a 22-point rise in economic optimism to 25%, while their trading outlook increased by six points to 43%. International businesses remained more optimistic overall, although their trading outlook fell by three points to 62% amid higher costs, economic uncertainty, and staffing shortages.
The external conditions cited in the survey included lower global energy prices, steady interest rates, and reduced uncertainty during the fieldwork period. Those factors can ease pressure on fuel, materials manufacturing, plant operation, and project finance, but tender prices will continue to reflect labour availability, insurance, compliance, logistics, and the risk carried under individual contracts.
Improved confidence may still affect behaviour before it appears in official output data. Businesses with a clearer view of demand are more likely to retain skilled staff, maintain estimating capacity, invest in equipment, and pursue framework opportunities. Companies expecting another downturn are more likely to preserve cash, reduce speculative recruitment, and price risk defensively.
The July result gives construction its strongest confidence position relative to recent averages, but the next test is conversion. Sustainable improvement will show through secured orders, viable schemes, payment performance, and work beginning on site rather than a single monthly sentiment reading.
Further Business Barometer releases will indicate whether the rise holds as energy prices, interest rates, and geopolitical conditions change. For now, construction companies are markedly more positive than they were in June, although their own trading expectations remain more restrained than the headline confidence figure suggests.