House building slump offset by ‘resilient’ commercial work


UK house building suffered its second-fastest downturn last month since during the pandemic – but was offset by an upturn in commercial and civil engineering work. 

House building remained the weakest-performing part of the construction sector at 40.7 during August, according to the latest S&P Global/CIPS Construction Purchasing Managers’ Index (PMI).   

Scores above 50 indicate output has risen, while below 50 means it has fallen. 

At 50.8, down from 51.7 in July, overall construction output during August signalled a marginal increase in total activity.  

Commercial building continued to grow at a robust pace (54.2), holding close to July’s five-month high.  

Civil engineering activity (52.4) also increased, but the speed of growth slipped to its lowest since April. 

Firms also said rising interest rates and concerns about the near-term economic outlook had led to more cautious spending among clients, especially in the residential sector, prompting a decline in new orders. 

Although only modest, the downturn in order books was the steepest since May 2020. 

Business activity forecasts for the year were the weakest since January, and job creation – while up for the seventh month running – had lost momentum since the previous month, largely due to falling sales volumes.  

Sub-contractor usage also softened in August. 

While supplier delivery times improved at a robust pace. 

“Though the construction sector overall showed an improvement in August, several imbalances in the figures give cause for concern,” said Dr John Glen, chief economist at the Chartered Institute of Procurement & Supply (CIPS).  

“Residential building took another knock further into contraction as new housing starts weakened. The cost-of-living crisis continued to squeeze household finances and buyers were reluctant to commit in the shadow of potentially another interest rate in September. Housing activity fell at its second sharpest level since 2009, excluding the pandemic years, and overall new orders dropped at the fastest rate since May 2020. The sector was propped up overall by some improvements in commercial activity such as office refurbishments.  

“This below par performance had a knock-on effect on job creation which was starting to lose momentum. The right skills remained in short supply and without pipelines of new work coming through, recruitment levels were reduced. 

“One bright spot in August’s figures was the second biggest improvement in supplier delivery times for 14 years as constraints on raw materials eased and supply chain performance improved.” 

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