UK Construction Slows as Demand Softens

A downturn in UK construction has worsened unexpectedly amid weaker client demand and the start of fewer new project in recent months.

New data today shows the S&P Global/CIPS UK construction purchasing managers’ index falling to 48.4 in January, from 48.8 in December.

Falling below the 50.0 no-change mark, it shows the contraction in the sector has worsened.

The reading was the weakest in just over two and a half years. Market consensus, as cited by FXStreet, had been expecting an improved reading of 49.5.

“Construction companies once again cited a headwind from lacklustre market conditions, rising interest rates and fewer new project starts in the residential segment,” said Tim Moore, S&P Global Market Intelligence economics director.

“Commercial building also slipped into contraction as the subdued UK economy weighed on business investment.”

With a reading of 44.8, house building was the weakest category in construction output. The rising cost of borrowing and “unfavourable” market conditions led to lower volumes of residential work.

Employment in the sector also fell for the second month in a row, with the pace of job shedding reaching a two-year high. The firms surveyed commented on hiring freezes and non-replacement of voluntary leavers resulting from weaker demand.

“However, there were positive signals for longer-term prospects across the construction sector, with business activity expectations staging a swift rebound from the low point seen last December. For some firms, the recovery in business optimism to its highest for six months was driven by signs of a turnaround in new sales enquires at the start of 2023,” Moore continued.

The UK construction PMI is compiled by S&P Global from responses to surveys sent to around 150 UK construction firms, with data collected betwen January 12 and 30.

By Elizabeth Winter, Alliance News senior markets reporter


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