Fall in housebuilding drives steepest drop in construction output since covid

A deepening slump in housebuilding activity in September drove the construction industry to register its steepest drop in output since the first pandemic lockdown, according to a survey of purchasing managers.

The monthly CIPS/PMI index found that the overall UK purchasing managers’ index fell to a reading of 45 in September, its lowest since May 2020, where any figure below 50 indicates a decline in output.

The index recorded a score for housing of 38.1, the lowest figure recorded for the sector, outside of the first pandemic lockdown, since April 2009. The housebuilding sector, which recorded 40.7 last month, has now recorded a decline in output in the survey for 10 consecutive months, according to the Chartered Institute of Purchasing and Supply and S&P Global.

The report said declines were led by a steep and accelerated fall in housebuilding, with survey respondents widely reporting cutbacks to housebuilding projects amid rising borrowing costs and weak demand conditions.

However, the September numbers, which the survey report also said reflected “shrinking order books” more widely, are also the first time that all the three sectors covered – housing, commercial and civil engineering – have been in decline at the same time since the 2020 covid-19 lockdown.

This month the commercial sector scored 47.7, down from 54.2, while the civil engineering sector report a score of 45.7, down from 52.4.

The fall in overall activity represents a sharp decline in fortunes from the last couple of months, in which construction activity has seen marginal growth based on a strong performance from the commercial sector.

The report said falling workloads in the month led to the fastest rise in sub-contractor availability since July 2009, with confidence about the market slipping to its lowest level since December last year.

Joe Sullivan, partner at business advisory firm MHA, said the figures reflected a “sustained slowdown” in the construction sector which the scrapping of the HS2 western leg “definitely does not help”. He added: “September’s hold in the base rate didn’t weaken confidence further but it didn’t help either. Current interest rates push more homeowners onto expensive mortgages as their existing deals finish, weakening an already tepid housing market.

“We’re seeing a sustained deferral of work across the wider sector. Developers continue to mothball sites or slowdown their build rates, even in prime locations.”

Fraser Johns, finance director at Beard Construction, said: “After three months of growth and many positive signs for the sector, today’s news is another reminder that we’re not out of the woods just yet. The continued downturn in housebuilding amid low demand and higher borrowing costs is once again having a significant impact on the wider industry picture.”