Key survey of purchasing managers reports ninth successive month of decline in housing output

The slump in housebuilding activity accelerated last month, according to a key business barometer.

The S&P Global/CIPS UK Construction purchasing managers index for August said the housebuilding sector recorded a score of 40.7, where any score above 50 means growth.

House building

House building output fell even further last month

This was a deterioration from the 43 recorded in July and is the ninth successive month in which the score has remained below the 50 watershed, marking declining output. The fall was also the second fastest since May 2020 at the height of the first covid-19 lockdown.

The survey reported that housebuilder respondents commented on subdued market conditions and headwinds to activity from cutbacks to new build projects.

But there was better news for the commercial construction sector which grew to 54.2, while civil engineering was also on the up registering 52.4. These scores saw the overall construction index remain in positive territory with a score of 50.8, despite the declining housing performance, although this was a fall from the 51.7 recorded the month before.

The survey comes as the UK’s largest housebuilder Barratt today confirmed it plans to cut output by anything up to 23% in the current financial year in response to weak market demand.

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.