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Tories Taken To Task On House Building
Yet another fall in house building shows the Conservative party needs to match Labour in its commitment to building new homes, says the Federation of...
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House Building Takes A Massive Nose Dive
A steep and accelerated downturn in house building caused UK construction companies to report a renewed decline in overall workloads in the month of June.
The latest data also highlighted a reduction in new orders for the first time since January.
On a more positive note, softer demand and fewer supply bottlenecks resulted in the sharpest improvement in delivery times for construction inputs since July 2009. This also contributed to an outright decline in purchasing prices for the first time in thirteen-and-a-half years.
The reduction in output levels was marginal overall but this masked divergent trends across the three major categories:
Residential work decreased at the steepest pace since May 2020. Aside from the lockdown-related fall in house building, the rate of contraction was the fastest since April 2009.
Survey respondents widely commented on weaker demand due to rising borrowing costs and a subdued outlook for the housing market.
How very civil
Civil engineering was the best-performing segment with business activity rising at the second-fastest pace since June 2022. Construction companies mostly noted increasing work on infrastructure projects.
Commercial building also expanded at a solid pace in June although the rate of growth slipped to a three-month low. Rising demand for refurbishment projects was cited in June but some firms reported more cautious decision-making by clients.
Residential outlook
With rising interest rates on house building projects, alongsidevconcerns among clients about the general economic outlook, construction companies sought to reduce their inventories and cut back on purchases of products and materials in June. Mirroring the trend for new orders, the reduction in input buying was the first for five months.
The latest improvement in vendor performance was the strongest for around 14 years. Survey respondents widely commented on improved availability of inputs due to rising stocks among vendors and softer underlying demand.
Cost of materials
June data signalled a marginal decline in overall input prices across the construction sector. This was the first outright reduction in average cost burdens since January 2010. Construction companies cited lower fuel, steel and timber prices, alongside more competitive market conditions in response to falling demand.
Meanwhile, sub-contractor charges increased at the slowest pace for 31 months.
Confidence
Construction firms signalled a downturn in business confidence for the third month running in June. Weaker optimism about future workloads mostly reflected concerns related to rising interest rates and subdued housing market conditions.
Comment
Tim Moore, economics director at S&P Global Market Intelligence, says: “Weaker housing market conditions in the wake of higher borrowing costs acted as a major constraint on UK construction output in June. Total industry activity declined for the first time in five months due to the steepest downturn in residential work since May 2020. Aside from the lockdown-related fall in house building, the rate of decline was the fastest for just over 14 years.”
Picture: Building planners and purchasing managers are feeling glum about prospects for the rest of 2023.
Article written by Cathryn Ellis
20th July 2023