Housebuilding slide leads to steepest fall in construction for three years
Activity in the UK’s construction sector decreased at the fastest rate since May 2020 as housebuilding rapidly declined.
According to the S&P Global and CIPS UK Construction purchasing managers’ index (PMI), housebuilding fell deeper into negative territory in September, as rising interest rates weighed on demand.
Housebuilding activity dropped to 38.1, down from 40.8 last month and comfortably below the 50 mark which separates growth from contraction. Aside from the pandemic, the latest fall in housing activity was the steepest since April 2009.
Firms commented on cutbacks to housebuilding projects amid rising borrowing costs and weak demand conditions.
“A rapid decline in housebuilding activity acted as a major drag on workloads, with construction companies widely commenting on cutbacks to new residential development projects in the wake of sluggish demand and rising borrowing costs,” Tim Moore, economics director at S&P Global Market Intelligence, said.
Rising interest rates have sent a shiver through the housing sector as consumers struggle with more expensive mortgages.
Other construction sectors were also in contraction. Civil engineering recorded 45.7 in September while commercial building fell to 47.7 having seen “solid growth” throughout the summer.
This brought the overall construction PMI to 45.0, down sharply from 50.8 last month and put the sector in contraction for the first time in three months.
“After some positive signs over the summer months, September saw a bump back down to earth for commercial construction as concerns over the future of the economy hampered demand and delayed new projects,” John Glen, chief economist at CIPS, said.
The slower rate of activity meant that construction firms slowed their rate of hiring while use of sub-contractors fell for the first time since January.