Britain’s construction sector is currently experiencing its most significant downturn since the onset of the Covid-19 pandemic in May 2020. A recent survey conducted by S&P Global has revealed alarming declines in various areas of construction, including housebuilding, commercial projects, and civil engineering.
Firms within the sector attribute this decline to several factors: fragile market confidence, delays in launching new projects, and a noticeable shortage of new work. The S&P Global report indicated “a sharp and accelerated reduction in output levels” across the board. Builders have reported facing challenging market conditions, with new orders plummeting at the most rapid pace seen in over five years, leading to an increase in job cuts.
November saw the UK Construction Purchasing Managers’ Index (PMI) fall to 39.4, down from 44.1 in October—the lowest reading since the initial lockdown measures of 2020. Any PMI reading below 50 signals contraction, underscoring the severity of the downturn. This pattern marks eleven consecutive months of reduced construction output, according to S&P Global.
Breaking down the sub-sector performances, housing activity registered an index of 35.4, commercial construction at 43.8, and civil engineering dropped to a grim 30.0. Tim Moore, the economics director at S&P Global Market Intelligence, noted that client confidence was weak, compounded by investments being deferred in anticipation of the Budget, which further stymied activity. He highlighted that this decline in industry activity has been led primarily by notable drops in both infrastructure and residential construction.
The outlook for the coming year appears grim as many companies have indicated diminished expectations for future business activity. Reports suggest that cutbacks to client budgets and overarching worries about the UK’s long-term economic growth prospects are contributing to a bleak sentiment in the sector.
In related economic news, the new car market in the UK also demonstrated signs of strain, with a slight decline in registrations for November, driven largely by reduced purchases from private buyers. Sales of battery electric vehicles (BEVs) have slowed, raising concerns that impending tax changes on EVs could jeopardize the transition to net-zero emissions.
Investor sentiment has likewise been affected by budget uncertainties, leading to record equity fund outflows in November, according to Calastone. With £3.02 billion removed from equity funds, this marked one of the worst months on record, reflecting worries over potential tax hikes and policy changes.
Meanwhile, the energy sector is witnessing a significant investment strategy as Ofgem has approved £28 billion for upgrading the electricity grid. While this move is intended to bolster energy resilience and support economic growth, it is projected to lead to increased charges for consumers.
In light of these developments, analysts and industry leaders stress the urgent need for clarity and stability to restore confidence across the construction sector, the car market, and broader economic activities. The confluence of uncertainty from the Budget, rising costs, and evolving regulations is reshaping the landscape for businesses and consumers alike in the UK.
