Housebuilding suffered its worst fall in output in almost three years in April, data from S&P Global shows, although overall construction rose.
Residential construction slipped to 43.0 last month, the fastest rate of decline since May 2020, according to the S&P Global/CIPS UK Construction Purchasing Managers’ Index, with a mark below 50.0 indicating contraction.
The survey’s respondents commented on “delays to new housebuilding projects, alongside constraints on demand from softer market conditions and higher borrowing costs”.
However, overall construction activity lifted to 51.1 in April, compared to 50.7 the month before, taking the sector above the 50.0 neutral mark for the third month in a row.
The report points out that “supply conditions improved to the greatest extent since September 2009, reflecting an upturn in materials availability and fewer instances of transport delays”.
It adds that cost inflation was the lowest for almost two-and-a-half years.
Commercial building was the fastest-growing part of the sector in April, at 53.9, with improving economic conditions boosting client’s willingness to spend. This area posted its second-strongest pace of growth since October 2022.
Civil engineering activity, at 52.0, also picked up, supported by resilient pipelines of work on infrastructure projects, but this left housebuilding as “by far the weakest-performing segment in April”.
Across the industry, confidence edged to a three-month low.
Around 44% of the survey panel forecast a rise in output in the next 12 months, while only 13% expect a fall.
Survey respondents mostly commented on optimism due to resilient client demand. However, some firms “noted concerns about subdued housing market activity, rising interest rates, and the uncertain economic outlook”.
Chartered Institute of Procurement & Supply chief economist Dr John Glen says: “The sharp decline in UK housebuilding in April will be a cause for concern, as it becomes clear that the recent interest rate rises will continue to hamper consumer demand for some time to come.
“With a further rate rise expected next week, there will be concerns that things will get worse before they get better for UK housebuilders.”
Beard finance director Fraser Johns adds: “After a difficult start to the year in January, it’s positive to see the sector continuing to bounce back with a sustained period of growth.
“While the sector as a whole may not be firing on all cylinders, reports of both commercial work and civil engineering expanding demonstrates the greater confidence found in the market.
“Avoiding a recession and the continued easing of both cost and supply pressures have undoubtedly been key drivers in boosting activity.
“However, with headline inflation figures remaining resilient, there is still a fair degree of uncertainty both for businesses and individuals.”
