Construction expectations flop in November

UK construction companies are expecting workloads to fall further than had been expected according to the latest seasonally adjusted S&P Global / CIPS UK Construction Purchasing Managers’ Index®.

There was a renewed slowdown in business activity growth during November, reflecting subdued demand and reduced risk appetite among clients. A number of survey respondents noted that higher borrowing costs and worries about the economic outlook had curtailed construction activity.

Moreover, expectations for business activity growth during the year ahead continued to slide in November, with optimism
the lowest for two-and-a-half years. Aside from the levels seen at the start of the pandemic, the degree of positive sentiment was the joint-weakest since December 2008.

At 50.4 in November, the headline Index – which measures month-on-month changes in total industry activity – registered above the 50.0 no-change mark for the third month running. However, the index was down from 53.2 in October and pointed to the weakest performance since August.

Commercial work was the only segment to register an overall rise in business activity in November (index at 51.1). House building activity meanwhile stalled (index at 50.0), which ended at three-month period of marginal expansion. Construction companies often noted higher mortgage rates and falling consumer confidence as factors that had held back residential activity.

Civil engineering activity (46.7) declined for the fifth consecutive month. The latest reduction was the sharpest since August. Lower volumes of output were mainly linked to a lack of new work to replace completed projects.

Tim Moore, Economics Director at S&P Global Market Intelligence, which compiles the survey said: “Stalling house building activity contributed to the weakest UK construction sector performance for three months in November. Survey respondents noted that new residential building projects had been curtailed in response to rising interest rates, cancelled sales and worries about the
economic outlook.

“Construction growth was largely confined to the commercial segment, but even here the speed of expansion slowed considerably since October as client confidence weakened  in response to heightened business uncertainty. At the same time, a lack of new work to replace completed projects resulted in another fall in civil engineering activity. “The number of construction firms anticipating a rise in overall business activity during the year ahead exceeded those forecasting a decline by only a very fine margin during November. Moreover, disregarding a three-month period of negative sentiment at the start of the pandemic, our survey measure of business expectations across the construction sector was the joint-weakest since December 2008.”