UK housebuilding declines at sharpest rate for three years

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UK housebuilding activity slumped at the sharpest rate for three years last month, despite growth improving across the wider construction industry.

A closely-watched industry survey showed that growth in civil engineering and commercial building helped to offset the slump in housebuilding, which comes amid pressure on consumer finances and further hikes to interest rates.

The latest S&P Global/CIPS construction purchasing managers’ index scored 51.6 overall last month, ticking upwards from 51.1 in April, representing the fourth consecutive month of improvement.

Any score below 50 is considered a decline, whereas anything above is seen as growth.

It was ahead of the expectations of economists, who had forecast a reading of 51 for the month.

“Rising demand among corporate clients and contract awards on infrastructure projects meanwhile underpinned the fastest rise in new orders since April 2022.”

Commercial building was the strongest performing part of the industry, with a 54.2 reading as construction firms saw confidence continue to improve.

Meanwhile, civil engineering reported a reading of 53.9 – the strongest performance for 11 months.

However, subdued market conditions and concerns about interest rates, which rose to a 14-year high of 4.5% last month, dampened activity in residential housing.

The reading of 42.7 for the housebuilding sector was the steepest decline since the impact of the first lockdown at the start of the Covid-19 pandemic.

John Glen, chief economist at the Chartered Institute of Procurement & Supply (CIPS), said: “The residential sub-sector is closely linked to consumer confidence and levels of spending.

“A further hike in interest rates is expected this month, and along with the relentless increase in the cost of living is making buyers hesitate about purchasing homes.

“As a result, builder confidence was pinched to remain below the survey average, as business costs remained high and firms expanded their workforce numbers at only a modest pace as they were cautious about their own affordability rates.”

Firms across the construction sector also revealed that order books grew at the fastest rate since April last year.

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