Home building has slowed further due to economic turmoil still heavy on the construction sector.
Figures released today by the Chartered Institute of Procurement and Supply (CIPS) show an 11th consecutive month of decline in house building activity in October.
Civil engineering workloads fell at their steepest pace since the summer of 2022, according to data compiled by S&P Global Market Intelligence, while non-residential construction work also fell.
With interest rates and inflation remaining high and the economy stagnant, nearly one in five construction buyers surveyed predicted a further decline in activity over the next year. Fewer than two in five expected workloads to pick up during that time, with the remainder expecting no change.
The improvement in supply conditions and the fall in demand contributed to a further drop in purchase prices. The latest fall in input costs was the steepest in more than 14 years as the UK recovered from the global financial crisis.
Reduced workloads also led to a decrease in subcontractor charges for the first time in more than three years.
Dr John Glen, chief economist at CIPS, said there was no doubt it was a “difficult time” for the industry.
“High interest rates and weak consumer demand for new homes continue to drag down the UK construction sector, with a lack of new tender opportunities and a cut back on existing projects in the construction industry homes,” he added.
“The bright side is that high borrowing costs are having the intended effect of curbing rising inflation. Previously, suppliers could raise their prices in response to rising demand. The fall in construction activity has now tilted the negotiations in favor of buyers, and suppliers must pass on lower prices for raw materials such as wood and steel.
“There are more subcontractors available for work and some are reducing their prices in reaction to falling demand.”
Fraser Johns, chief financial officer at contractor Beard Construction, predicted a “difficult end to the year” for the industry, with “some smaller companies potentially not going to make it as far amid a growing number of insolvencies”.
He added: “As always, careful attention to tender plans and costs is required in the current climate, as well as constant dialogue with customers and suppliers. As parts of the industry face greater pressure, we must also respond to opportunities in more resilient sectors.”
Brian Smith, head of cost and commercial management at construction consultancy Aecom, said the winter break could be a long one: “Contractors looking to build their order books will find some comfort in ‘focus on modernization and decarbonisation work but, more broadly, would anticipate the start of the project and new orders remaining underwhelming in the New Year.’
