Construction sector contracts after bad month for housebuilders

The S&P Global/CIPS construction purchasing managers’ index scored 45.0 in September, down from 50.8 in August.

Construction companies struggled last month (James Manning/PA) (PA Wire)

The UK’s construction sector contracted heavily last month as the housebuilding sector had one of its worst months since 2009, an influential survey has suggested.

Companies said that projects to build homes were being cut back as demand weakens and the cost of borrowing rises.

“Output levels declined across the UK construction sector for the first time in three months during September and the latest downturn marked the worst overall performance since the early stages of the pandemic,” said Tim Moore, economics director at S&P Global Market Intelligence.

The latest S&P Global/CIPS construction purchasing managers’ index scored 45.0 in September, a steep drop from 50.8 in August. Economists had expected it to reach 50.0.

The lack of activity has given space for suppliers to catch up with demand and create slack in the supply chain, which the construction sector will be hoping to take advantage of once demand returns

Dr John Glen, CIPS

“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,” Mr Moore said.

The PMI score for the residential sector hit 38.1 during the month, the worst-performing part of the construction industry.

That is the worst score, apart from a period during the pandemic, since April 2009.

Chartered Institute of Procurement & Supply chief economist Dr John Glen said: “It has been a tough year for residential construction and the sharp decline in September shows the pressure on the sector is still a long way from easing, despite the pause on the raising of interest rates.”

Elsewhere, the civil engineering sector scored 45.7, and commercial building declined slightly at 47.7.

Employment in the sector continued to grow, but growth slowed compared with August and was the lowest since June.

Dr Glen said: “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.

“There is some comfort in the fact that the days of disrupted supply chains and soaring inflation are behind us for the time being, with delivery times continuing to fall and input prices remaining stable.

“The lack of activity has given space for suppliers to catch up with demand and create slack in the supply chain, which the construction sector will be hoping to take advantage of once demand returns.”