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UK construction activity falls at fastest pace since May 2020

By Michele Maatouk

Date: Monday 06 Feb 2023

UK construction activity falls at fastest pace since May 2020

(Sharecast News) - Activity in the UK construction sector fell in January at its fastest pace since May 2020 as house building took a hit, but business optimism rebounded, according to a survey released on Monday.
The S&P Global/CIPS construction purchasing managers' index declined for the fourth month in a row, to 48.4 from 48.8 in December. Analysts had been expecting a reading of 48.5.

A reading above 50.0 signals expansion, while a reading below indicates contraction.

House building was the weakest-performing category, with the index falling to 44.8 in January from 48.0 a month earlier, and the rate of contraction the steepest since May 2020. Lower volumes of residential work were attributed to rising borrowing costs, unfavourable market conditions and greater caution among clients.

Tim Moore, economics director at S&P Global Market Intelligence, said: "A sharp and accelerated decline in house building activity led to the weakest UK construction sector performance for just over two-and-a-half years in January.

"Construction companies once again cited a headwind from lacklustre market conditions, rising interest rates and fewer new project starts in the residential segment. Commercial building also slipped into contraction as the subdued UK economy weighed on business investment."

Still, Moore said there were positive signals for longer-term prospects across the construction sector, with business activity expectations staging a rebound from the low point seen last December.

"For some firms, the recovery in business optimism to its highest for six months was driven by signs of a turnaround in new sales enquires at the start of 2023," he said. "Other construction companies simply noted gradual improvements in the general economic outlook and hoped that confidence would return at a later stage this year to alleviate the current lack of momentum in the house building sector."


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