Construction activity falls at fastest rate since 2020 as housebuilding drops off

Construction activity has fallen at its fastest rate since the first Covid lockdown.

The latest S&P Global / CIPS UK Construction PMI figures show total construction orders fell for the third successive month in January.

Total activity fell from 48.8 to 48.4 month-on-month. It is the steepest rate of contraction since May 2020, when a score of 28.9 was registered. Any score below 50 in the index indicates a decline in activity.

The index suggests the fall was driven largely by a drop in housebuilding activity, which declined from a score of 48 in December to 44.8 in January, also the lowest score recorded since May 2020.

A spokesperson for S&P Global and CIPS said: “House building was the weakest-performing category of construction output in January, with the rate of contraction the steepest since May 2020.

“Lower volumes of residential work were attributed to rising borrowing costs, unfavourable market conditions and greater caution among clients”

The index also shows commercial activity fell 48.2, the first time it has contracted for five months. Civil engineering however contracted at a slower pace of 49.7 and is “now close to stabilisation”, according to S&P Global and CIPS.

The PMI also showed the second slowest rise in purchase prices since December 2020, which was due to “cutbacks to input buying and improved materials availability”. It said that 43% of survey respondents anticipate a rise in business activity, with only 17% forecasting a decline. S&P Global and CIPS said this was a “sharp rebound” on last month. 

It said: “Construction companies often commented on improved sales pipelines and hopes of a turnaround in new orders. Some firms cited optimism that confidence would eventually return to the housing market over the course of 2023, assisted by a stabilisation in borrowing costs.”