According to the latest surveys, the UK construction sector is in freefall. That overall decline is the most rapid rate of decline since the onset of the pandemic crisis. This continued decline puts performance at its worst level since May 2020. November’s numbers still show a big drop in activity at all ends of the industry. Clients are holding back on making investment decisions in the meantime because of uncertainty over the prospective Budget measures. This reluctance is increasing the constraints in commercial construction.
Tim Moore, the economics director at S&P Global Market Intelligence, said that there are still deep scars left in the industry. This is notably due to weak client confidence and a lack of new project starts. He stated, “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.”
The drop off in construction activity is deeply concerning. This trend is particularly concerning in light of the UK government’s commitment to building 1.5 million homes in England by 2029. This is an ambitious goal, that means building 300,000 homes a year, something never seen since the 1960s. Optimism in the key sector has plunged to its lowest level since December of last year. Consequently, reaching this target seems more at risk than ever before.
Meet Rob Wood, chief UK economist at Pantheon Macroeconomics, who suggested that the market is in its worst state since the 2008 financial crash. Even so, he described it as “catastrophic.” He added that while conditions are challenging, it is “hard to believe that conditions in the sector are genuinely as bad as during a full lockdown.” Regardless, Wood expects construction activity to remain anemic for months to come. This signals an impending long-term drought for the industry.
The commercial construction segment is enduring a savage gale of headwinds. Clients are worried everywhere about budgets being cut. Consequently, they are more conservatively managing their cash flow and deferring any major investment decisions, deepening the slowdown in this sector.
Matt Swannell, chief economic adviser to the EY Item Club, commented on the situation, advising that any anticipated recovery should “be approached with a healthy degree of scepticism.” His comments highlight the instability over the expectation of continued industry expansion.