Housebuilding challenges

5 May 2023

You might say that it’s deja vu all over again. 

Data for April in the Purchasing Managers’ Index (PMI) produced by S&P Global and the Chartered Institute of Procurement & Supply (CIPS) shows that construction companies remained in expansion mode but with uneven growth across the sector, just as in recent months. But the housebuilding market seems to be in the doldrums.

At 51.1 in April, the headline seasonally adjusted index which measures month-on-month changes in total industry activity was up slightly from 50.7 in March and above the neutral 50.0 value for the third month in a row. However, the latest reading signalled only a marginal overall expansion of construction activity.

Commercial building was the fastest-growing area in April (index at 53.9), with improving economic conditions helping to boost clients' willingness to spend. The rate of expansion was the second-strongest since October 2022, although survey respondents cited a growth headwind from squeezed client budgets and elevated cost inflation.

Civil engineering activity (index at 52.0) also picked up in April, supported by resilient pipelines of work on infrastructure projects.

Less positively, housebuilding was by far the weakest-performing segment (index at 43.0), with the rate of decline for total residential work being the steepest for nearly three years. Survey respondents commented on delays to new house building projects, alongside constraints on demand from softer market conditions and higher borrowing costs.

Nevertheless, new orders received by construction companies increased for the third consecutive month in April. Higher levels of new work were attributed to resilient client demand, especially for commercial building.

Tim Moore, Economics Director at S&P Global Market Intelligence, said that “the return to growth for UK construction output appears worryingly lopsided as residential work decreased for the fifth successive month. Extended delays on new housing starts were reported again in April, due to a considerable headwind from elevated mortgage rates and weak demand. 

“While there have been some signs of a recent stabilisation in market conditions, this has yet to feed through to construction activity. In fact, the latest reduction in residential building was the fastest since May 2020.”

Dr John Glen, Chief Economist at the CIPS, added: The mixed picture found in the UK construction industry in April is representative of an economy still trying to recalibrate after being buffeted by the manifold challenges of political instability, lockdowns and supply chain pressures.”

Overall, then, the picture painted by the survey data continues to be one showing challenges, but also opportunities. 

Photo: Ryan Collis 

● Don't forget to explore the Site-Eco area of the blog for news of sustainable products and developments relevant to the world of hire.