Activity in the UK’s construction industry picked up in November, but housebuilding continued to decline, casting doubt on the government’s ambitious housing targets.
The S&P Global/CIPS UK Purchasing Managers’ Index (PMI) for construction rose to 55.2 in November, up from 54.3 in October. While overall construction activity expanded, driven by strong demand in commercial and civil engineering projects, residential housebuilding faced a significant downturn.
Housebuilding activity dropped to 47.9, marking its steepest decline since June. Construction firms attributed this to high borrowing costs and weakened consumer confidence, with many reporting reduced demand for new homes. A PMI reading above 50 indicates growth, while below 50 signals contraction.
On the commercial side, construction grew at its fastest pace since May 2022, suggesting a shift in focus toward non-residential projects amid the economic challenges affecting the housing market.
The Bank of England is expected to maintain interest rates after a slight reduction in November. Governor Andrew Bailey signaled that any future rate cuts will be gradual. However, the high cost of borrowing remains a significant concern for construction companies, impacting new orders and optimism in the sector.
The Labour Party has been warned that it will miss its target of building 1.5 million homes by the end of the parliament (300,000 homes annually) unless it introduces more radical planning reforms.
Tim Moore, Economics Director at S&P Global Market Intelligence, noted that while the construction sector had managed to avoid the broader economic slowdown, concerns about high borrowing costs and rising employment expenses had affected the sector’s future outlook. As a result, job creation slowed to a three-month low.
Construction firms also expressed worries about increased labour costs and subcontractor reliance, factors which could further dampen activity in the sector.
The PMI for all UK sectors, including services and manufacturing, dropped to 50.9 in November, its lowest in a year, signaling broader economic concerns.
