Britain’s construction sector has seen activity contract for the eighth month running as the industry suffers its longest downturn since the beginning of the pandemic, according to a report.
The latest S&P Global UK construction purchasing managers’ index (PMI) showed a reading of 45.5 in August.
This is up from 44.3 in July, which was the worst for over five years, but it yet again falls below the neutral 50 threshold, indicating that activity is contracting.
Anything above 50 suggests activity is expanding.
The sector’s PMI reading has signalled shrinking output for eight months in a row, which is the longest continuous downturn since early 2020 at the height of the Covid-19 pandemic, according to S&P Global Market Intelligence.
The report also showed that optimism among building firms is at its lowest since December 2022, flagging business uncertainty and worries over the wider UK economy.
The report shows that output was under pressure across all three sub-sectors, although a slower reduction in commercial building helped offset steeper declines in residential and civil engineering activity.
Housebuilding activity saw a further slowdown last month, with the reduction marking the steepest decline since February.
Civil engineering was the weakest performer, with activity falling at the fastest pace since October 2020 as firms said they were seeing new project work dry up.
“Construction companies widely commented on challenging market conditions, intense price competition and headwinds from sluggish UK economic activity,” the report said.
Hiring cut backs also intensified across the sector in August, with employment numbers dropping at the fastest pace since May, according to the data.
The report said building firms were putting in place hiring freezes and not replacing workers when they leave in the face of fewer new orders and higher staff costs.
But purchasing price inflation reached a 10-month low, helping ease build cost pressures.
Tim Moore, economics director at S&P Global Market Intelligence, said: “Construction activity has decreased throughout the year-to-date, which is the longest continuous downturn since early 2020.
“August data signalled only a partial easing in the speed of decline after output fell at the fastest pace for over five years in July.
“Elevated business uncertainty and worries about broader prospects for the UK economy meant that construction sector optimism weakened in August.”
Elliott Jordan-Doak, senior UK economist at Pantheon Macroeconomics, said: “The bigger picture is that sentiment in the construction sector remains chronically weak despite the modest crumbs of comfort from some of the PMI’s balances ticking up.
“The wave of optimism that characterised the sector a year ago when the (Bank of England’s) Monetary Policy Committee cut borrowing costs and the new government outlined its investment plans has dissipated.
“But we remain more optimistic on construction sector activity than the PMI suggests.”
Matthew Pointon, senior commercial real estate economist at Capital Economics, said a recent increase in commercial property lending added to signs of a rebound in that sector.
He said: “Clouds over the economic and fiscal outlook may lead some firms to delay breaking ground.
“But with commercial property capital values now rising and interest rates set to fall back, we expect activity will continue to see a slow recovery.”
