Output falls as housebuilding slump accelerates

Output fell last month as the slump in housebuilding accelerated, according to a key business barometer.

The overall S&P Global/CIPS UK Construction PMI index for August remained in positive territory with a score of 50.8, although this was a fall from the 51.7 recorded the month before.

Any score above 50 means growth but housebuilding’s woes continued with the sector recording a score of 40.7, a deterioration from the 43 recorded in July. The fall was the second fastest since May 2020 at the height of the first covid-19 lockdown.

But there was better news for the commercial sector which grew to 54.2 and civil engineering was also on the up to 52.4.

Tim Moore, economics director at S&P, said: “UK construction companies experienced another slump in house building activity during August as rising interest rates and subdued market conditions resulted in cutbacks to client demand and new build projects in particular. Aside from the pandemic, the recent downturn in residential work has been the steepest since spring 2009.”

Max Jones, director in Lloyds Bank’s infrastructure and construction team, said: “Sentiment remains somewhat subdued among contractors we speak to, with order books and working capital levels flatter than they’d like. Ongoing pressures from the cost and availability of materials also means contractors will be monitoring the health and performance of their supply chains closely.”

Construction companies noted that rising interest rates and concerns about the near-term economic outlook had led to more cautious spending among clients in residential, the survey added.