The UK construction activity contracted at the fastest pace since May 2020 amid rising borrowing costs and weak demand, survey results from S&P Global showed on Thursday.
The Chartered Institute of Procurement & Supply construction Purchasing Managers’ Index posted 45.0 in September, down from 50.8 in August. The score fell below the neutral 50.0 mark for the first time since June.
Residential work was the worst performing area of the construction sector. This was followed by civil engineering activity.
Respondents cited cutbacks to house building projects amid rising borrowing costs and weak demand conditions as reasons for the weakness in the residential work. Commercial building work contracted moderately in September.
Total new business dropped for the third time in last four months. Moreover, the rate of decline was the steepest since May 2020.
Lower client demand led firms to reduce employment growth in September. The rate of job creation was the slowest since June.
Reflecting weaker order books and efforts to reduce inventories, purchasing activity contracted notably. Supplier performance improved at a robust pace. Delivery times for construction products and materials shortened in each of the past seven months.
Further, cost burdens were broadly unchanged in September. Confidence among constructors was the lowest since December 2022 amid concerns about higher borrowing costs and weaker housing market conditions.
Chartered Institute of Procurement & Supply Chief Economist John Glen said, “The impact of high mortgage rates and low house buying demand continues to flow through the supply chain and negatively hit the UK construction industry.”
In September, the Bank of England kept its interest rate unchanged after 14 back-to-back rate hikes.
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