UK housebuilding has fallen to its weakest level since the Covid-19 lockdowns in 2020, underlining the scale of the challenge facing ministers as they try to revive construction and meet housing targets.
New data from S&P Global shows activity across the UK construction sector fell further in December, with both residential and commercial construction recording the fastest decline in more than four years.
The survey of purchasing managers found that residential and commercial construction recorded the sharpest decline since May 2020, when construction sites were forced to close during the first national lockdown. Civil engineering activity also fell, although more slowly than in November.
Overall, the UK construction purchasing managers’ index (PMI) rose slightly to 40.1 in December, up from 39.4 the previous month. However, the reading remains well below the 50 mark that separates growth from contraction, suggesting another month of declining activity.
The downturn has now stretched to 12 consecutive months, making it the longest continuous period of contraction in the construction sector since the 2007-2009 global financial crisis.
S&P Global said weak customer confidence continued to weigh heavily on workloads as many companies reported that investment decisions had been delayed ahead of the November Budget. Although some of this uncertainty has now subsided, the knock-on effect is still being felt in the weak order books.
However, there were initial signs of stabilization. Business expectations for the year ahead rose to a five-month high in December, suggesting confidence may be recovering as policy clarity improves.
Tim Moore, economic director at S&P Global Market Intelligence, said: “UK construction firms reported renewed challenging business conditions and falling workloads in December, but the pace of the downturn moderated from November’s five-and-a-half-year record. Many firms cited subdued demand and fragile customer confidence. Although budget uncertainty eased, delayed year-end spending decisions still contributed to weak sales pipelines.”
“By sector, the largest declines in activity since May 2020 were in residential and commercial construction, while civil construction experienced a slower decline.”
The data reinforces fears that the government’s ambitions to accelerate house building and expand social housing remain at risk, particularly as high interest rates, weak developer confidence and limited investment continue to hamper new projects.
