A ‘fresh and sharp drop’ in construction activity that has seen residential building fall to its lowest level since since May 2020 is a serious a wake up call for the government, the Federation of Master Builders (FMB) has said.
Data from S&P Global UK Construction Purchasing Managers’ Index (PMI) shows ‘a considerable slump’ in the UK construction sector at the start of the third quarter, dragged down by a drop in residential building.
The PMI – a seasonally adjusted index tracking changes in total industry activity – signalled the sharpest contraction in over five years, with firms citing site delays, lower volumes of incoming new business and weaker consumer confidence.
‘Having trended upwards in recent months, our survey data for July signal a fresh setback for the UK construction sector, with total industry activity falling at the sharpest rate since May 2020’, said Joe Hayes, principal economist at S&P Global Market Intelligence.
“Dissecting the latest contraction, we can see a fresh and sharp drop in residential building, as well as an accelerated fall in work carried out on civil engineering projects.”
Forward-looking indicators from the survey imply that UK constructors are preparing for challenging times ahead, Hayes added.
“They’re buying less materials and reducing the number of workers on the payroll. Expectations also continue to underwhelm, despite a modest pick-up in confidence from June’s two-and-a-half-year low.”
Brian Berry, chief executive of the FMB, confirmed that a lack of consumer confidence is an issue for smaller businesses. ‘Small building companies are very reliant on consumer confidence which is why the prospect of further tax increases is such a concern’, he said.
“The proposed planning reforms announced in May need to be given absolute priority with a focus on fast‑track approvals for sites of up to nine houses to help small building companies deliver the homes Britain needs.”
The downturn in activity will actively undermine the government’s commitment to building 1.5 million new homes, Berry believes – as he warned that reforms to the planning system, greater borrowing flexibility and workforce upskilling are failing to achieve the required momentum. ‘Delivery is key’, he said.
“Which is why July’s plunge should be setting alarm bells ringing across both industry and government.”
