Construction slows
6 November 2023
UK construction companies indicated that challenging business conditions persisted during October, with business activity falling for the second month running amid a lack of new work to replace completed projects.
At 45.6 in October, the headline figure from the construction purchasing managers’ index (PMI) gathered by S&P Global and the Chartered Institute of Procurement & Supply (CIPS) was up slightly from 45.0 in September. However, it was the second-lowest reading since May 2020 and signalled a marked decline in total construction activity.
A level of 50.0 indicates no change.
House building decreased for the eleventh successive month and at a much steeper pace than elsewhere in the construction sector (index at 38.5). Civil engineering activity also decreased sharply in October (index at 43.7) and the rate of decline was the fastest since
July 2022. Meanwhile, there were signs of stabilisation in the commercial building segment, with activity falling only marginally and at a slower pace than in September (index at 49.5).
Around 37 per cent of the survey panel forecast a rise in business activity during the year ahead, while 19 per cent predict a decline. The degree of optimism was the lowest so far this year, say the report authors.
Dr John Glen, Chief Economist at the CIPS, said: “High interest rates and low consumer demand for new homes continue to drag down the UK construction sector, with a lack of new tender opportunities and a cutback of existing projects being reported across the house building industry.
“The silver lining is that high borrowing costs are having their intended effect of putting the brakes on rising inflation. Previously suppliers were able to hike their prices in response to soaring demand.
"Falling construction activity has now tilted the negotiations in favour of buyers and suppliers are having to pass on lower prices for raw materials like timber and steel,” he said, adding that “there is no doubt that UK construction is in a difficult period and there will likely be further challenging months to come.”
Photo: Rene Rauschenberger
