UK housebuilding has fallen to its weakest level since the Covid-19 lockdowns of 2020, underlining the scale of the challenge facing ministers as they attempt to revive construction and meet housing targets.
New data from S&P Global shows activity across the UK construction sector continued to shrink in December, with housing and commercial construction work both contracting at the fastest pace in more than four years.
The survey of purchasing managers found that housebuilding and commercial construction declined at their sharpest rate since May 2020, when building sites were forced to shut during the first national lockdown. Civil engineering activity also fell, although at a slower pace than in November.
Overall, the UK construction Purchasing Managers’ Index (PMI) edged up slightly to 40.1 in December, from 39.4 the previous month. However, the reading remains well below the 50 mark that separates growth from contraction, signalling another month of falling activity.
The downturn has now stretched to 12 consecutive months, making it the longest unbroken period of contraction in the construction sector since the global financial crisis of 2007–09.
S&P Global said fragile client confidence continued to weigh heavily on workloads, with many firms reporting that investment decisions had been delayed in the run-up to November’s Budget. Although some of that uncertainty has now lifted, the knock-on effect is still being felt in weak order books.
There were, however, early signs of stabilisation. Business expectations for the year ahead rose to a five-month high in December, suggesting that confidence may be starting to recover as policy clarity improves.
Tim Moore, economics director at S&P Global Market Intelligence, said: “UK construction companies once again reported challenging business conditions and falling workloads in December, but the speed of the downturn moderated from the five-and-a-half-year record seen in November. Many firms cited subdued demand and fragile client confidence. Despite a lifting of Budget-related uncertainty, delayed spending decisions were still contributing to weak sales pipelines at the close of the year.
“By sector, the fastest reductions in activity were seen in housing and commercial construction since May 2020, while civil engineering recorded a slower pace of decline.”
The data adds to concerns that the government’s ambitions to accelerate housebuilding and expand social housing remain at risk, particularly while high interest rates, weak developer confidence and constrained investment continue to hold back new projects.
