August marks the eighth month of contraction in the UK construction sector, signaling deepening economic concerns.
Topics covered
The UK construction industry is currently facing a significant downturn, with activity contracted for eight consecutive months. This marks the longest period of decline since the onset of the pandemic. According to the latest data from S&P Global, the construction purchasing managers’ index (PMI) recorded a reading of 45.5 in August, showing a slight improvement from July’s 44.3, the lowest score for the sector in over five years.
However, this figure remains below the neutral threshold of 50, indicating ongoing contraction in the industry.
Ongoing Decline and Sector-Wide Challenges
The persistent drop in the PMI underscores a serious challenge for the sector, which has not experienced such a sustained downturn since early 2020, during the peak of the Covid-19 pandemic.
The report reveals that all three sub-sectors—residential, commercial, and civil engineering—are under pressure. While commercial building has seen a slower decline, it has not compensated for the sharper reductions observed in residential housing and civil engineering activities.
Housebuilding has experienced its steepest decline since February, with fewer new projects being initiated.
Civil engineering is particularly suffering, with activity falling at the fastest rate since October 2020. Many firms have reported a shortage of new project work, exacerbating the sector’s challenges.
Uncertainty and Reduced Optimism
The report indicates that optimism among construction firms has dropped to its lowest level since December 2022, reflecting widespread concern about the UK’s overall economic conditions. “Construction companies have widely commented on challenging market conditions, intense price competition, and headwinds from sluggish economic activity in the UK,” the report states. This uncertainty has led to hiring freezes and hesitance to replace departing staff, further complicating the employment landscape.
AGGIORNAMENTO ORE [insert time]: Hiring cutbacks have intensified, with employment figures declining at the fastest rate since May. Firms are responding to the lack of new orders and rising staff costs by adopting a cautious hiring approach.
Inflation Trends and Expert Insights
Despite these challenges, there is a potential positive note: purchasing price inflation has reached a ten-month low, which may ease some cost pressures on construction firms. Tim Moore, economics director at S&P Global Market Intelligence, stated, “Construction activity has decreased throughout the year-to-date, marking the longest continuous downturn since early 2020. August data signaled only a partial easing in the speed of decline after output fell at the fastest pace in over five years in July.”
Moore further emphasized that high levels of business uncertainty and concerns regarding the broader economy continue to cloud the outlook for the construction sector, contributing to a diminished sense of optimism moving forward.
