LONDON (Reuters) – Britain’s construction sector contracted sharply in February, with residential house-building declining at one the fastest rates since 2009 due to weak demand and high borrowing costs, according to a survey published on Thursday.
The preliminary reading of the S&P Global/CIPS UK Construction Purchasing Managers’ Index fell to 44.6 last month from January’s 48.1, its weakest level since May 2020 and below all forecasts in a Reuters poll of economists.
The all-sector PMI, which combines the services, manufacturing and construction sectors, fell to a 16-month low of 50.0 in February from 50.3 in January.
The construction PMI’s gauge of housebuilding tumbled to 39.3 from 44.9 in January, one of the sharpest downturns on record, excluding the global financial crisis and the start of the COVID-19 pandemic.
“Sharply declining order books rippled through the UK construction sector in February, which led to accelerated reductions in output volumes, employment and input buying,” Tim Moore, economics director at S&P Global Market Intelligence, said.
“Weak demand conditions were attributed to entrenched caution among clients, against a backdrop of subdued consumer confidence and lacklustre economic performance” he added
Total new orders declined by the most since May 2020, with firms citing cutbacks to investment and concerns about economic growth.
The pace of job-shedding accelerated last month, with the employment index at its lowest since November 2020. Moore said there were signs that a hike in payroll costs, due to come into force in April, was having an impact.
Recent business surveys have shown declining business optimism and similar concerns about investment, hiring and demand due to measures announced in finance minister Rachel Reeves’ October budget.
Other sectors measured by the PMI fell, too. Civil engineering activity was at its weakest in more than four years, while commercial work fell marginally.
Input costs increased by the most in almost two years as suppliers sought to pass on higher raw material, energy, fuel and wage costs.
The all-sector PMI, which combines the services, manufacturing and construction sectors, fell to a 16-month low of 50.0 in February from 50.3 in January.
(Reporting by Suban Abdulla; Editing by Christina Fincher)
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