PMI index stays in red for tenth month in row
Construction output is on its longest period of continuous decline since the global financial crisis in 2008 with the latest monthly figures showing the sharpest fall since May 2020.
Output fell for the tenth month in a row in October, the bellwether S&P Global UK Construction Purchasing Managers’ Index has revealed.
It said last month’s figure was 44.1, down from the 46.2 recorded in September. And the figure was below the 44.3 score recorded in July, which at the time was the sharpest rate of decline since May 2020.
Civil engineering was the weakest performing sector with a score of 35.4, down from 42.9, while residential also continued to suffer, falling to 43.6 from 46.8 the previous month. The one bright spot continued to be commercial which was flat at 46.3.
The report added: “Shrinking workloads and increased payroll costs meant that staffing numbers were reduced again in October. The rate of job shedding was the steepest for just over five years, with survey respondents often commenting on the non-replacement of voluntary leavers.
“Subcontractor usage also decreased, albeit to the least marked extent since July. Demand for construction products and materials dropped at a sharp and accelerated pace in October, which mirrored the trends seen for output and new orders.”
The ongoing grim figures has prompted growing concern among some with Aecom’s head of cost management, Brian Smith, warning: “This holding pattern of stubborn inflation, high interest rates and paused projects is clearly weighing on the sector. Activity has so far been relatively stable, but firms are running out of road before the lack of new work starts to have serious impacts.”
With the Budget three weeks away, S&P’s economics director Tim Moore said “subdued demand in the wake of heightened political and economic uncertainty” was also a factor behind the drop, echoing concerns raised by London QS Core Five last month which said Budget speculation has put the construction industry “in a sort of limbo” with developers delaying decisions until details of chancellor Rachel Reeves’ statement become known.
And Kelly Boorman, national head of construction at restructuring firm RSM UK, also said the upcoming Budget was a factor behind the fall saying the slump in housing had been “driven by market uncertainty ahead of the Budget. We’re seeing contractors stall on project completions in anticipation of fiscal announcements, further tempered by ongoing concerns around unrealistic government housing targets and affordability challenges for consumers.”
But Thomas & Adamson’s regional director Jordan Smith pointed out that “optimism has edged higher, reflecting the belief that lower borrowing costs and future infrastructure investment could start to turn sentiment around”.
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