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Activity in the UK construction sector fell month-on-month in June, survey data showed on Thursday, due to a worsening decline in residential work.
The S&P Global/CIPS UK construction purchasing managers’ index fell to 48.9 points in June from 51.6 in May. Falling below the 50-point no-change mark, it shows the sector has fallen into contraction territory.
June’s reading was lower than FXStreet-cited market consensus of 50.9.
‘UK construction companies signalled a renewed decline in business activity during June as a steep and accelerated downturn in house building weighed on overall workloads,’ S&P Global said.
New orders fell for the first time since January.
However, delivery times for inputs saw the sharpest improvement since 2009 due to softer demand and fewer supply bottlenecks.
The decline in the sector was due to a sharp deterioration in residential work, which the sub-index falling to 39.6. ‘Aside from the lockdown-related fall in house building, the rate of contraction was the fastest since April 2009. Survey respondents widely commented on weaker demand due to rising borrowing costs and a subdued outlook for the housing market,’ the survey read.
Civil engineering was the best-performing area of construction, with its sub-index reading 53.1, amid increasing work on infrastructure projects.
Commercial work also saw robust growth in June, with respondents citing increasing demand for refurbishment projects. Some noted ‘more cautious decision-making’ from clients. The commercial subindex came in at 53.0.
John Glen, chief economist at the Chartered Institute of Procurement & Supply, commented: ‘Looking ahead, there were few reasons to be cheerful as optimism fell to its lowest since January. A large blot on the landscape was the fall in employment growth. With interest rates at the highest for 15 years and inflation four times over the Bank of England target, the sudden reduction in construction sector hiring is one of the red flags facing the UK economy at the moment.’
The UK construction PMI is compiled by S&P Global from responses to surveys sent to 150 construction companies, with data collected between June 12 and 29.
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