Homebuilding decreases for 11th successive month

Homebuilding has slowed even further as economic turmoil continues to weigh heavily on the construction industry.

Figures published today by the Chartered Institute of Procurement and Supply (CIPS) show an 11th successive month of decreasing homebuilding activity in October.

Civil engineering workloads dropped at their sharpest rate since the summer of 2022, according to the data compiled by S&P Global Market Intelligence, while non-housing building work also dipped.

With interest rates and inflation remaining high, and the economy stagnant, almost one in five construction buyers surveyed predicted a further fall in activity over the coming year. Fewer than two in five expected a recovery in workloads during that time, with the rest forecasting no change.

Improving supply conditions and falling demand contributed to a renewed drop in purchasing prices. The latest decline in input costs was the steepest for more than 14 years, when the UK was recovering from the global financial crisis.

Reduced workloads also led to a decline 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 period” for the industry.

“High interest rates and low consumer demand for new homes continue to drag down the UK construction sector, with a lack of new tender opportunities and a cutback of existing projects being reported across the housebuilding industry,” he added.

“The silver lining is that high borrowing costs are having their intended effect of putting the brakes on rising inflation. Previously, suppliers were able to hike their prices in response to soaring demand. Falling construction activity has now tilted the negotiations in favour of buyers, and suppliers are having to pass on lower prices for raw materials like timber and steel.

“More subcontractors are available for work and some are reducing their prices in reaction to the falling demand.”

Fraser Johns, finance director at contractor Beard Construction, predicted a “tough end to the year” for the industry, with “some smaller firms potentially not making it that far amid a growing number of insolvencies”.

He added: “As ever, a careful eye is needed on tendering and cost plans in the current climate, as well as a constant dialogue with clients and suppliers. As parts of the industry face greater pressure, we must also respond to opportunities in the most resilient sectors.”

Brian Smith, head of cost management and commercial at construction consultancy Aecom, said the winter lull could be a long-lasting one: “Contractors looking to build their order books will find some solace in targeting retrofit and decarbonisation work but, more broadly, we would anticipate project starts and new orders remaining underwhelming into the New Year.”

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