Housebuilding continues to drag down UK construction
07 November 2023
Britain’s construction industry shrank for a second month in a row in October, according to a survey of construction buyers.
The S&P Global/CIPS UK construction Purchasing Managers’ Index (PMI) improved only marginally to 45.6 from September’s 45.0, which was the lowest reading since May 2020 when Britain was under a Covid lockdown. A score of anything less than 50.0 represents a contraction.
Buyers blamed higher borrowing costs hitting housebuilders and worries about the weak economy putting clients off new investment.
The construction sector has been the most obvious victim so far of the Bank of England’s run of interest rate increases between December 2021 and August this year.
The house-building component of Monday’s PMI improved only fractionally and remained deep in contraction territory. Civil engineering firms also reported a shrinkage.
As new work dried up, confidence levels hit their lowest so far in 2023 on concern about the economy and high borrowing costs. Jobs in the sector grew at the slowest pace since June.
The weakness translated into the biggest fall in prices paid by building firms since August 2009 and rates charged by subcontractors fell for the first time in over three years, potentially easing some inflation pressure in the economy.