Housebuilding slowed in the UK in November as the construction industry expanded at its lowest rate since 2013, with the exception of a pre-election slump in April – underlining the tough task facing the government to build 400,000 affordable homes by the end of the decade.
The Markit/CIPS purchasing managers’ index for the construction industry expanded at a rate of 55.3 in November, down from 58.8 in October. Although any number above 50 in PMI surveys represents growth, it was the weakest expansion in nearly two and a half years – excluding the slowdown in April amid uncertainty over the general election result.
Shortages of skilled staff and the prospect of an increase in mortgage rates next year are understood to have dampened enthusiasm among private house builders to increase capacity over the coming months. Without an acceleration of new home building over the next couple of years the government faces missing its target, which George Osborne outlined in the autumn statement last week.
The chancellor said he wanted to increase incentives for first time buyers to drive the market for affordable homes. But he also cut the Treasury’s financial support over the next two years for housing associations, which are the main providers of new affordable homes. A boost to public investment in house building only takes effect in the second half of the parliament.
Howard Archer, the chief UK economist at the consultancy IHS Global Insight, said the marked slowdown in housebuilding “will be particularly disappointing for the government”, adding that it “highlights the need for supportive action to boost the sector”.
A strong performance by the commercial sector kept the overall growth rate for the construction industry rising at a strong pace and most firms were optimistic about the outlook for next year.
Tim Moore, senior economist at Markit, said: “The UK construction recovery is down but not out, according to November’s survey data. Aside from a pre-election growth slowdown in April, the latest expansion of construction activity was the weakest for almost two and a half years amid a sharp loss of housebuilding momentum.
“Residential activity lost its position as the best performing subcategory, but a supportive policy backdrop should help prevent longer-term malaise. Strong growth of commercial construction was maintained in November as positive UK economic conditions acted as a boost to new projects, while civil engineering remained the weakest performer.”
Housebuilders have proved reluctant to ramp up their output despite the strengthening recovery, preferring to maintain their profit margins and a steady order book.
According to stockbroker Hargreaves Lansdowne, Britain’s biggest house builders Taylor Wimpey, Barratt Developments, Persimmon and Berkeley Group were among the best performing companies in the FTSE 100 over the past year. The broker said prices rose in the home construction sector by an average of 36%.
