‘Weak demand conditions were attributed to entrenched caution among clients, against a backdrop of subdued consumer confidence and lacklustre economic performance’
Activity in the UK’s construction sector fell last month, hitting its lowest point since the early days of the pandemic in May 2020.
The downturn was particularly severe for housebuilders, as new data reveals one of the most significant drops on record. According to the latest S&P Global construction purchasing managers’ index (PMI), the figure plummeted to 44.6 in February from 48.1 in January, defying economists’ expectations of a bounce back to 49.7.
This decline indicates a contraction rather than growth, with housing and civil engineering suffering severe setbacks and cost inflation soaring to its highest in almost two years. The PMI’s measure for housebuilding fell to 39.3 from January’s 44.9, marking one of the steepest declines ever recorded.
Excluding the pandemic period, this is the worst slump since the 2009 global financial crisis, as firms grapple with a sluggish housing market and soaring borrowing costs—despite government efforts to encourage new home development.
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.
“Besides the pandemic, total industry activity saw its sharpest decline since December 2019. This was driven by significant cuts in residential building and civil engineering work, while commercial construction activity showed some resilience. Survey participants largely pointed to a dearth of new projects in the house-building sector, due to weak market conditions and the effects of high borrowing costs.”
Ahead of the rise in minimum wage and employer taxes at the start of the new fiscal year in April, companies also reported a drop in employment. The increase in employer national insurance contributions (Nics) announced in the October Budget, intended to boost public services, led to more job losses, with builders noting that the rate of staff cuts was the most severe since November 2020.
The escalating costs also caused inflationary pressures to reach their peak since March 2023, further exacerbated by rising prices for raw materials, energy, and transport. Civil engineering activity hit its lowest point in over four years, while commercial builders experienced a less severe downturn.