UK construction activity contracts further in November

Activity in the UK construction sector declined for the third consecutive month in November on the back of another sharp drop in residential housebuilding.

The S&P Global and Chartered Institute of Procurement & Supply (CIPS) UK construction purchasing managers' index (PMI) fell to 45.5 last month from 45.6 in October. This was the third straight reading below the key 50-point level which separates growth from contraction.

It was also the second-lowest reading since May 2020 and came in below the consensus estimate for an increase to 46.3.

According to the survey, elevated borrowing costs and subdued demand for new housing projects were the main factors holding back construction activity in November.

House building was by far the weakest-performing segment of the sector, with the sub-index at just 39.2, while civil engineering was at 43.5 and commercial building at 48.1.

There was a continued lack of new work to replace completed projects, with total new orders down for the fourth month in a row, albeit declining at the smallest amount since August.

One bright spot was a big fall in input costs, with data showing the steepest reduction in purchasing costs across the construction sector for more than 14 years due to lower raw material prices and greater competition among suppliers.

"There is no doubt that 2023 has been a difficult year for the UK construction sector. Inflated borrowing costs and falling demand have conspired to further slow new building this month," said John Glen, chief economist at CIPS.

"Despite this, the sector has finally emerged from a period of intense supply chain pressure and prices are now falling across the board, especially for timber and steel. Projects are no longer being delayed due to unexpectedly high material costs with November seeing the sharpest reduction in purchasing prices since July 2009."