Construction activity tumbles to lowest level since pandemic

Activity in Britain’s construction sector plunged last month to its lowest level since May 2020, including one of the steepest declines on record for housebuilders, according to new figures.

The latest S&P Global construction purchasing managers’ index (PMI) showed a reading of 44.6 in February, sharply down from 48.1 in January.

Most economists had expected activity to rebound to 49.7 in February, just below the 50 mark that separates growth and contraction.

The fall was driven by steep declines in housing and civil engineering, while cost inflation also hit its highest point in nearly two years.

The poll’s gauge of housebuilding dropped to 39.3, down from 44.9 in January, one of the sharpest downturns on record.

Aside from the pandemic, it marks the worst decline since early 2009, in the midst of the global financial crisis, with companies citing a weak housing market and high borrowing costs.

It comes despite Government moves to pledge policy support to boost the development of new homes.

Tim Moore, economics director at S& Global Market Intelligence, said: “Sharply declining order books rippled through the UK construction sector in February, which led to accelerated reductions in output volumes, employment and input buying.

“Weak demand conditions were attributed to entrenched caution among clients, against a backdrop of subdued consumer confidence and lacklustre economic performance.

“Aside from the pandemic, total industry activity decreased at the steepest pace since December 2019.

“This was led by considerable reductions in residential building and civil engineering work, while a degree of resilience was reported for commercial construction activity.

“Survey respondents widely cited a lack of new work in the house-building segment, due to soft market conditions and the impact of elevated borrowing costs.”

Companies also pointed to falling employment, ahead of the minimum wage and employer taxes rising at the start of the new financial year in April.

Labour increased employer national insurance contributions (Nics) in the October Budget, designed to fund improvements to public services.

But the rise in costs also resulted in more job cuts, with builders saying the rate of staff reductions was the sharpest since November 2020.

The growing overheads also pushed inflationary pressures to climb to their highest point since March 2023, stretched even further by higher raw materials, energy and transport prices.

Civil engineering activity was also at its weakest in more than four years, while commercial builders saw a more modest decline.