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Biggest fall in UK construction activity since May 2020

construction  A builder working for Taylor Wimpey builds a roof on an estate in Aylesbury, Britain, February 7, 2017.  REUTERS/Eddie Keogh
UK construction has joined other sectors of the UK economy by shrinking in December. Photo: Eddie Keogh/Reuters

Construction activity in the UK fell in December at its sharpest rate since May 2020 as the outlook for the sector darkens amid higher prices and lower orders.

The latest S&P Global/CIPS construction purchasing managers’ index, closely watched by the housebuilding sector, scored 48.8 in December, down from 50.4 in November and marking the first contraction in activity since August.

Any score below 50 is considered a decline whereas anything above is seen as growth.

Read more: UK house prices fall more than £4,100 in one month as living costs tighten

December's reading ended a three-month sequence of growth, and represented the fastest rate of decline since May 2020.

"The UK's construction sector registered a relatively poor finish to 2022, with business activity falling into decline following a three-month growth sequence amid the fastest contraction in new work since the initial pandemic period in May 2020," S&P economist Lewis Cooper said.

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New orders declined last month after an increase in November, with survey respondents blaming "weak client demand, driven partly by higher prices amid ongoing inflationary pressures”.

“The challenging environment in December was subsequently reflected in pessimism amongst firms towards activity levels over the coming year, with business confidence downbeat for only the sixth time since the survey began in April 1997,” Cooper added

The survey found that housing activity declined for the first time since last July, while civil engineering recorded a sixth consecutive monthly contraction in output. Commercial construction kept growing.

Read more: UK mortgage approvals at lowest since pandemic

Meanwhile, John Glen, chief economist at the Chartered Institute of Procurement & Supply, warned of bleak prospects in the new year.

"Optimism remained very flat and at one of the starkest rates in the survey's history. Builders were reining back on recruitment unconvinced there will be enough growth in the UK economy in 2023 to justify additional expenditure when margins remained so squeezed," he said.

"Builders are fast running out of the resilient spirit maintained over the last couple of years as the blocks to success piled up and the winter of discontent with high inflation, strikes and shortages continues."

Watch: What is a recession and how do we spot one?