Just last month, the UK’s construction sector suffered one of its worst declines. This decline is the largest decrease we’ve experienced since the onset of the COVID-19 pandemic. Increasing apprehension over developing government fiscal policy is behind the slump. In consequence, clients are freezing on making investment commitments. As a result, the construction sector’s performance has fallen under scrutiny, raising concerns about the overall health of the UK’s economy.
According to the most recent Purchasing Managers’ Index (PMI) report, that’s no longer the case. That index score now appears at its lowest level since May 2020. Tim Moore, economics director at S&P Global Market Intelligence, highlighted the severity of the situation, stating, “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 in the sector’s optimism slipped to its lowest point since December 2022. Rob Wood, chief UK economist at Pantheon Macroeconomics, said the situation was “catastrophic.” He expressed skepticism regarding the PMI figures, suggesting that it is “hard to believe that conditions in the sector are genuinely as bad as during a full lockdown.” This positive news aside, he admitted that such activity is likely to “continue to be muted in the coming months.”
Construction activity that is almost exclusively commercial in nature had its worst last month. Worries about what might come in budget reconciliation have led our clients to delay making investments, stalling on new projects. Even the construction industry is frustrated. They will need additional support to achieve the government’s very ambitious goal of delivering 1.5 million homes in England by 2029. That’s the target of building 300,000 units a year — a rate not achieved since the 1960s.
The government’s pledge to boost housing development is critical as the construction sector serves as a key indicator of broader economic health. With the no-handouts, no-favors environment worsening, many business insiders are calling for a sober read of these PMI numbers. Matt Swannell, chief economic adviser to the EY Item Club, emphasized that these figures should “be approached with a healthy degree of scepticism.”