Double whammy of decreasing new orders and delayed projects
Construction buyers saw industry activity drop at its fastest rate for nearly five years in February.
The bellwether S&P Global UK Construction Purchasing Managers’ Index fell to 44.6 in February from 48.1 in January – the lowest mark since May 2020.
Residential building (index at 39.3) decreased for the fifth month in a row and was the weakest-performing area of construction activity in February.
Survey respondents cited weak demand conditions, headwinds from elevated borrowing costs and a lack of new work to replace completed projects.
Civil engineering activity (39.5) also registered a steep decline in February. The respective seasonally adjusted index was the lowest since October 2020.
Commercial construction (49.0) displayed a degree of resilience, with output levels falling only marginally and at a similar pace to that seen in the previous survey period.
Construction was hit by a double whammy of decreasing new orders and delayed projects.
Tim Moore, Economics Director at S&P Global Market Intelligence, said: “Sharply declining order books rippled through the UK construction sector in February, which led to accelerated reductions in output volumes, employment and input buying. Weak demand conditions were attributed to entrenched caution among clients, against a backdrop of subdued consumer confidence and lacklustre economic performance.
“Aside from the pandemic, total industry activity decreased at the steepest pace since December 2019. This was led by considerable reductions in residential building and civil engineering work, while a degree of resilience was reported for commercial construction activity. Survey respondents widely cited a lack of new work in the house building segment, due to soft market conditions and the impact of elevated borrowing costs.
“Construction companies remain optimistic overall about their growth prospects for the next 12 months, albeit less so than on average in 2024 amid increasing concerns about the broader UK economic outlook. There were also signs that rising payroll costs and purchasing prices have become a source of anxiety, with the latest increase in overall business expenses the steepest since March 2023.”
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