Activity in the housebuilding sector slowed in August as the British construction sector suffers its longest downturn since the beginning of the pandemic.
Closely-watched data from the latest S&P Global shows residential housebuilding activity slowed to a reading of 44.2 in August, as construction sector output fell for the eighth consecutive month.
The data marks another blow to Housing Minister Angela Rayner’s plan to build 1.5million homes by 2029.
Gareth Belsham, director of Bloom Building Consultancy, said: ‘Things have gone from bad to worse for housebuilders, with residential construction output falling at its fastest rate since February.’
It follows official data published on Wednesday revealing just 38,780 new homes were completed between January and March this year, which is just over half the amount needed in every three-month period to meet the target.
Meeting the 2029 goal would require around 300,000 homes to be completed each year, or 75,000 every three months.
The number built during the first three months of this year leaves the Government more than 36,000 below the required run rate.
Construction sector faltering
Britain’s broader construction sector saw activity contract for the eighth consecutive month in August, as the industry suffered its longest downturn since the beginning of the pandemic.
Activity slowdowns in the commercial engineering and residential housebuilding sub-sectors dragged the broader sector’s performance down. The commercial building sector performed better.
The latest reduction in output across the housebuilding category was the sharpest since February.
Across all sub-sectors in the construction industry ‘business activity projections for the year ahead were the least upbeat since December 2022’.
The latest S&P Global UK construction PMI showed a reading of 45.5 in August. This was up from 44.3 in July, which was the worst for over five years, but again fell below the 50 threshold. Anything above 50 suggests activity is expanding.
Civil engineering was the weakest performer, with activity falling at the fastest pace since October 2020 as firms said they were seeing new project work dry up.
‘Construction companies widely commented on challenging market conditions, intense price competition and headwinds from sluggish UK economic activity,’ the report said.
Hiring cut backs also intensified across the sector in August, with employment numbers falling at the fastest pace since May, according to the data.
The report said building firms were putting in place hiring freezes and not replacing workers when they left amid fewer new orders and higher staff costs.
But purchasing price inflation reached a 10-month low, helping ease build cost pressures.
Tim Moore, economics director at S&P Global Market Intelligence, said: ‘Construction activity has decreased throughout the year-to-date, which is the longest continuous downturn since early 2020.
‘August data signalled only a partial easing in the speed of decline after output fell at the fastest pace for over five years in July.
‘Elevated business uncertainty and worries about broader prospects for the UK economy meant that construction sector optimism weakened in August.’
Kelly Boorman, national head of construction at RSM UK, added: ‘Despite the government’s recent announcement to ease mortgage rules and remove barriers to home ownership, we’re yet to see this stimulate demand and accelerate housebuilding.
‘There are also further challenges for housebuilders as although lower interest rates and softer debt conditions support investment and improve affordability for first time buyers, current levels remain well below national housing targets.
Thomas Pugh, chief economist at RSM UK and Ireland, said: ‘Despite the warmest summer on record and below average rainfall, the construction industry still appears to lagging well behind the services sector.
‘Indeed, the continued weakness in the housing and civil engineering balances points to the difficulty that the government has had in turning its rhetoric on housebuilding and infrastructure investment into reality on the ground.’
On Tuesday, data revealed private sector output was at its strongest in a year last month, as Britain’s dominant services sector helped offset an ongoing decline in manufacturing.
Closely-watched data from S&P Global showed new business volumes expanded at the strongest pace since October 2024 in August.
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