In November, the UK’s construction sector experienced its biggest decline since the onset of the pandemic. This conclusion is based on one of our recent surveys. This sharp decrease is a part of the increasing trend of reducing activity, with levels falling to their lowest level since May of 2020. Analysts blame this fall on increasing uncertainty about future Budget measures, leading clients to postpone vital investment decisions.
Tim Moore, the economics director at S&P Global Market Intelligence, recently commented on November’s data. He called it a “deep retrenchment” in the building trades. He noted that frail client sentiment was a key factor behind the falloff. Equally as important, the pause in starting new projects cast another shadow, deepening this slump in activity.
In response, this month’s survey results pointed to the extreme challenges that commercial construction was up against, which experienced “severe headwinds” all month long. The future challenges for the construction sector are equally daunting. Worries over possible Budget amendments are stifling investment and pushing project starts further into the future.
Rob Wood, chief UK economist at Pantheon Macroeconomics, expressed skepticism regarding the severity of the conditions reported in the PMI survey. He stated that it is “hard to believe that conditions in the sector are genuinely as bad as during a full lockdown,” suggesting that while the data indicates distress, there may be factors influencing these results that warrant additional scrutiny. Wood further cautioned that growth in the construction industry is probably “to stay subdued in the months ahead.”
Yet the positive construction sector outlook has been dealt a blow. Moreover, it has dropped to its lowest reading since last December 2022. This trend is something to be deeply worried about the future of the industry. It’s failing to reach the UK government’s own lofty target of delivering 1.5 million new homes across England by 2029, or 300,000 per year—a rate not achieved since the 1960s. Yet for all of these ambitious goals, industry leaders argue that a lack of federal support is undermining the government’s efforts and their own to meet these targets.
Matt Swannell, chief economic adviser to the EY Item Club, advised that the PMI figures should “be approached with a healthy degree of scepticism,” highlighting the need for cautious interpretation of the data as it reflects broader economic conditions.