In November, the UK’s construction sector felt the industry’s biggest ever slump. That was the quickest rate of decline overall since the onset of the COVID-19 pandemic. Industry experts have identified increasing uncertainty over the federal government’s next budget as one of the main drivers of this downturn. This uncertainty has very much rattled client confidence and stymied crucial investment decisions.
New data showed that the pace of advance in the construction industry has hit a new bottom that’s not seen since May of 2020. This troubling decline has alarmed stakeholders. General optimism in the sector has fallen to its lowest level since December 2022. Tim Moore, the economics director at S&P Global Market Intelligence, noted that “November data revealed a sharp retrenchment across the UK construction sector as weak client confidence and a shortfall of new project starts again weighed on activity.”
In November, commercial construction hit major roadblocks. Our clients lost numerous contracts as many decided to wait on their investment decisions due to fear over anticipated budgetary actions. This hesitance played a huge role in the broader stagnation seen across the sector. Rob Wood, chief UK economist at Pantheon Macroeconomics, expressed skepticism about the extent of the decline, stating that it is “hard to believe that conditions in the sector are genuinely as bad as during a full lockdown.”
In the UK, the national government has committed to the construction of 1.5 million homes in England by 2029. That’s a significant pipe dream, because it involves building 300,000 properties annually! Since the 1960s, we’ve been failing to do this. Today, this illustrates a critical need to innovate and pare down the construction industry. Yet by all accounts, including Wood’s analysis, growth is deeply trending downward and will probably stay muted over the next several months.
Matt Swannell, chief economic adviser to the EY Item Club, advised caution in interpreting current market data, suggesting that these figures “should be approached with a healthy degree of scepticism.” His comments are indicative of a larger feeling in the industry about the state of the recovery—if one can be called that—while continuing to face an uncertain economy.