Yahoo Finance UK housebuilding slows despite record prices
UK housebuilding firms saw a slowdown in activity in June to the weakest growth for nine months.
The S&P Global Purchasing Managers' Index (PMI) for the construction sector dropped to 52.6 in June from 56.4 in May. A level above 50 signals expansion, while a reading below indicates contraction.
Housebuilding was the weakest area of construction activity for the fourth month in a row, with the sub-index falling to 49.3.
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Work on residential projects fell for the first time since 2020, despite house prices reaching a record. Commercial work also “saw a considerable loss of momentum” as businesses reined in spending.
“The gloomy UK business outlook and worsening consumer demand due to the cost of living crisis combined to put the brakes on construction growth in June,” S&P Global’s economics director, Tim Moore, said.
Job creation has been recorded in each month since February 2021. Survey respondents once again commented on shortages of candidates to fill vacancies, despite higher wage offers.
Joe Sullivan, partner at accountancy group MHA, said the construction sector is now feeling full impact of the war in Ukraine.
“Although the war began on 24 February, it takes time for the range of effects to work their way through. Together with these input cost increases, further shortages of raw materials like timber and manufactured goods such as generator components are behind the growing number of insolvencies in the construction sector,” he said.
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“The remarkable success of the residential property market continues but the rate of price increases is now slowing. However, the restriction in the supply of new plots is the key factor which will guard against the house ‘price bubble’ bursting significantly.”
Looking ahead, around 36% of construction companies anticipate a rise in business activity, compared to 17% that expect a decline.
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