Construction output drops again despite Rayner’s planning reforms
Construction activity has suffered a further decline and confidence is low despite minister Angela Rayner’s planning reforms getting a thumbs up from the Office for Budget Responsibility (OBR).
Rayner’s Ministry of Housing is introducing broad changes to planning rules as it hopes to deliver the UK’s construction sector an extra boost.
Its planning reforms have won the approval of the fiscal watchdog, which upgraded growth forecasts for 2026 and the years thereafter.
But optimism is yet to spread to construction firms, which have seen the fastest reduction in employment numbers in nearly five years, according to S&P Global’s purchasing managers’ index (PMI).
The PMI showed that activity has seen a downturn for the third month in a row as it posted a figure of 46.4 for March, below the 50-figure benchmark that indicates an overall increase in output compared to the previous month.
Confidence across the sector also fell to its lowest level since October 2023 as the UK’s poor economic outlook has weighed down on business prospects.
Civil engineering was the weakest sub-sector as the rate of contraction was at its fastest pace since October 2020.
Economics director at S&P Global Tim Moore said construction at large was facing headwinds from delayed decisions on major projects.
“March data highlighted a challenging month for UK construction companies as sharply reduced order volumes continued to weigh on overall workloads,” Moore said.
Spiralling employment costs, exacerbated by Chancellor Rachel Reeves’ £25bn national insurance tax raid, are also taking a hit on the sector.
“A lack of new projects, alongside pressure on margins from rising payroll costs, led to hiring freezes and the non-replacement of departing staff in March,” he said.
“The net result was the fastest pace of job shedding across the construction sector for nearly four-and-a-half years.”
The government is relying on the sector to help it achieve its target of building 1.5m homes in the next four years.
It has also made significant investments in national infrastructure projects central to its mission to deliver growth. But the latest data on construction will send a warning to government officials who are feeling buoyant after planning reforms have gained credibility.