Construction sector sees steepest decline since start of pandemic – Supply Management

A slump in new house building last month has contributed to the fastest decline in new orders in the construction sector since May 2020.
This is the topline finding of the latest S&P Global/CIPS UK Construction Purchasing Managers’ Index, which found that activity in the construction sector decreased sharply for the first time in three months.
The index registered a score of 45.0, down significantly from the 50.8 registered in August and well below the neutral 50.0 mark for the first time since June.
All three segments of construction experienced a reduction in business activity following the steep, accelerated fall in house building.
Residential work posted a score of just 38.1, the worst-performing area of output; followed by civil engineering activity at 45.7. Aside from the pandemic, the latest fall in activity was the steepest since April 2009.
Shrinking order books also slowed employment growth with respondents slashing their business activity expectations for the year ahead.
CIPS chief economist John Glen said: “The impact of high mortgage rates and low house buying demand continues to flow through the supply chain and negatively hit the UK construction industry.”
He added: “It has been a tough year for residential construction and the sharp decline in September shows the pressure on the sector is still a long way from easing, despite the pause on the raising of interest rates.”
Rising borrowing costs and weak demand conditions drove cutbacks to house building projects, with some firms raising fears that the economic outlook had dampened client demand, and led to a lack of new work to replace completed projects.
Purchasing activity decreased at a “solid pace,” reflecting weaker order books and efforts to reduce inventories.
Falling workloads, meanwhile, led to the fastest rise in sub-contractor availability since July 2009, with their usage decreasing for the first time since January.
Survey respondents said they are still experiencing high fuel bills and some rises in raw material prices. However, cost burdens were somewhat relieved by lower shipping costs and greater price competition among suppliers. 
Supplier performance, meanwhile, also improved, with delivery times for products and materials shortening for the seventh month running. 
Although the proportion of construction firms predicting a turnaround in customer demand over the year ahead  was greater than those forecasting a decline (41% vs 17%), the degree of confidence slipped to its lowest since December 2022.
Glen added: “There is some comfort in the fact that the days of disrupted supply chains and soaring inflation are behind us for the time being, with delivery times continuing to fall and input prices remaining stable.”
He added: “The lack of activity has given space for suppliers to catch up with demand and create slack in the supply chain, which the construction sector will be hoping to take advantage of once demand returns.”

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