Challenges in the UK construction sector continued through October, according to the headline S&P Global / CIPS UK Construction Purchasing Managers’ Index™, a seasonally adjusted index tracking changes in total industry activity.
Business activity fell for the second month running, amid a lack of new work to replace completed projects. Fragile client confidence and elevated borrowing costs were often cited as reasons for weaker sales.
At 45.6 in October, the headline Index™ was up slightly from 45.0 in September. However, it was still the second-lowest reading since May 2020. House building decreased for the eleventh successive month in October and at a much steeper pace than elsewhere in the construction sector (index at 38.5). Falling work on residential construction projects was widely linked to a lack of demand and subsequent cutbacks to new projects. Civil engineering activity also decreased sharply in October (index at 43.7) and the rate of decline was the fastest since July 2022. Meanwhile, there were signs of stabilisation in the commercial; building segment, with activity falling only marginally and at a slower pace than in September (index at 49.5). Total new work fell for the third month running in October and the rate of contraction was the joint-sharpest since May 2020.
Worries about shrinking pipelines of construction work contributed to a moderation in business confidence for the third successive month in October. Around 37% of the survey panel forecast a rise in business activity during the year ahead, while 19% predict a decline. The degree of optimism signalled by the survey in October was the lowest so far this year.
Tim Moore, Economics Director at S&P Global Market Intelligence, which compiles the survey said: “October data highlighted another solid reduction in UK construction output as elevated borrowing costs and a wait-and-see approach to new projects weighed on activity. House building decreased for the eleventh month running and once again saw a much steeper downturn than other parts of the construction sector. There were signs of stabilisation in the commercial building segment, however, with output falling only slightly since September. “Total new work continued to fall more quickly than at any time since the initial pandemic lockdown period, which contributed to shrinking demand for construction products and materials during October. Competitive pressure on suppliers to pass on lower commodity prices resulted in the fastest decline in input costs since August 2009. Sub-contractors meanwhile cut their charges for the first time in more than three years in response to a further downturn in workloads during October.”