UK construction output plummets to five-year low
The UK’s construction output hit a five-year low in February as its fastest downturn since May 2020 continued.
S&P Global’s UK Construction Purchasing Managers Index dropped to 44.6 in February, down from 48.1 in January.
The latest figure indicated a steep decline in overall construction activity was propelled by a sluggish performance in residential buildings, the sector’s weakest performing area.
According to S&P, residential building decreased for the fifth month in a row, sinking to 39.3—the fastest decline since early 2009.
Respondents to the survey said weak demand, inflated borrowing costs and a lack of new work to replace completed projects drove the conditions.
S&P’s economics director, Tim Moore, said: “Sharply declining order books rippled through the UK construction sector in February, which led to accelerated reductions in output volumes, employment and input buying.
“Weak demand conditions were attributed to entrenched caution among clients, against a backdrop of subdued consumer confidence and lackluster economic performance.”
The index’s drop in January ended the industry’s 10-month expansion streak.
Job cuts for the second consecutive month
As activity slowed, construction companies cut stuff for a second consecutive month, with the pace of job cuts at the highest levels since November 2020.
S&P suggest the lower employment figures were linked to employers not replacing leavers in a bid to patch up costs and fewer new projects.
Amidst this, sub-contractor usage also had its sharpest fall since May 2020.
Commercial construction managed to show some resilience, with only marginal declines and its index at 49.0.
Business sentiment maintained degrees of optimism with 39 per cent of survey respondents anticipating an upturn in the year ahead.
Lowering borrowing costs helped boost confidence, however subdued consumer spending and risk aversion among clients were cited as factors scaling back respondents’ optimism.
Moore added: “Construction companies remain optimistic overall about their growth prospects for the next 12 months, albeit less so than on average in 2024 amid increasing concerns about the broader UK economic outlook.
“There were also signs that rising payroll costs and purchasing prices have become a source of anxiety, with the latest increase in overall business expenses the steepest since March 2023.”