Construction sector continues decline in December, but pace slows – survey

Companies were struggling to get enough new orders to replace completed projects, the survey found.

The housebuilding sector was particularly badly hit last month, the survey suggested (James Manning/PA) (PA Wire)

The long-running woes for UK builders continued in December, but showed some signs of coming off recent lows, a new survey has suggested.

Construction companies reported a recent slump in housebuilding continued last month, but the firms started hiring a little more, hopeful that 2024 might bring better conditions.

The latest S&P Global/CIPS construction purchasing managers’ index scored 46.8 in December, up from 45.5 in November. Analysts had expected a score of 46.4.

Any score that is lower than 50 means that the sector is contracting, the further below 50 it gets the faster that contraction is considered to be. The score is calculated by responses to a survey which is sent to business leaders around the country.

Although 46.8 still represents a fairly rapid decline, it is the best score the index has posted since September.

Expectations of falling interest rates during the months ahead appear to have supported confidence levels among construction companies

Tim Moore, S&P Global Market Intelligence

Within the largest construction PMI score the housebuilding sector scored 41.1 and the civil engineering sector 47.0.

“Construction companies experienced another fall in business activity at the end of 2023 as weak order books meant a lack of new work to replace completed projects,” said Tim Moore, economics director at S&P Global Market Intelligence.

“Housebuilding was the worst-performing area of construction activity, but even in this segment there were signs that the downturn has started to ease.”

The softer decline in new work that businesses were winning and hopes of a turnaround this year meant that the number of people employed by the construction sector rose last month, the survey found.

“Survey respondents also continued to cite worries about the broader UK economic outlook, especially in relation to prospects for commercial construction,” Mr Moore said.

“However, expectations of falling interest rates during the months ahead appear to have supported confidence levels among construction companies.

“December data indicated that 41% of construction firms predict a rise in business activity over the course of 2024, while only 17% forecast a decline. This contrasted with negative sentiment overall at the same time a year earlier.”