Housebuilding slump deepens as construction sector hits year-long decline

The latest S&P Global UK construction purchasing managers’ index (PMI) showed a reading of 40.1 in December, up from 39.4 in November.

This was below the neutral 50-point threshold, indicating that activity has contracted for the 12th month in a row.

Nevertheless, the downturn for the overall sector was slower than the previous month, which had marked the lowest level since May 2020.

This was due to civil engineering shrinking by slightly less than in November, but it was nonetheless the weakest-performing category of construction last month.

As for housebuilding and commercial work, the slump in activity was the deepest since the early Covid pandemic.

Builders surveyed indicated that confidence among their clients remained fragile and less demand had resulted in smaller workloads at the end of the year.

Many firms also pointed to their clients delaying investment decisions ahead of the autumn budget, therefore having a knock-on effect on workloads.

Tim Moore, economics director at S&P Global Market Intelligence, said: “Despite a lifting of Budget-related uncertainty, delayed spending decisions were still cited as contributing to weak sales pipelines at the close of the year.”

But he also noted a stronger sense of optimism that business activity will improve among firms in the latest survey.

“Some survey respondents attributed greater optimism to projections of rising infrastructure spending, especially in the utilities sector,” Mr Moore said.

“There were also hopes that lower borrowing costs and easing inflationary pressures could boost demand across the construction sector.”