Housebuilding falls for 11th month in a row amid slump in demand for new homes
Housing construction has fallen for eleven months in a row as high financing costs put pressure on demand for new homes.
S&P Global said the activity index in the UK construction sector – where scores below 50 show a contraction – stood at 45.6 in October.
That was up slightly from 45 in September, but still the second-weakest reading since May 2020 during the depths of the Covid-19 pandemic.
The decline was steepest in residential construction, followed by civil engineering.
The analysis group’s report found “signs of stabilization” in commercial construction.
Slowdown: S&P Global said its index of activity in the UK construction sector – where scores below 50 are showing a contraction – reached 45.6 in October
“The decline in work on residential projects was largely related to a lack of demand and subsequent cuts in new projects,” the report said.
On a more positive note, builders saw the cost of doing business fall at the fastest pace in fourteen years, with the price of materials such as timber and steel, as well as transport, falling.
The Bank of England has raised interest rates from a record low of 0.1 percent to a 15-year high of 5.25 percent since December 2021, in a battle to get inflation under control.
That has pushed up mortgages, and while it is hoped rates have peaked, a reduction is not expected until well into next year.
Higher financing costs have put the brakes on the housing market, causing builders to scale back their construction plans.
John Glen, chief economist at the Chartered Institute of Procurement & Supply, said: ‘The positive is that high borrowing costs are having the intended effect of slowing rising inflation.
‘However, there is no doubt that the UK construction sector is in a difficult period and more challenging months are likely to follow.’