UK construction buyers report steepest fall in purchasing costs for more than 14 years

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UK construction buyers have reported the steepest decline in purchasing costs across the construction sector for more than 14 years, amid falling demand.

The latest S&P Global/CIPS UK Construction Purchasing Managers’ Index (PMI) indicated that construction business activity fell for a third consecutive month in the UK in November.

The seasonally adjusted index registered a score of 45.5 (where 50.0 indicates no change), down from 45.6 in October.

The figures were dragged down by another sharp fall in residential building amid higher borrowing costs and subdued demand for new homes.

House building was the weakest segment, scoring 39.2, followed by civil engineering at 43.5.

Commercial building was higher at a score of 48.1 but has now declined for three months in a row. Construction companies in the segment reported delayed decision-making by clients on major investment spending and lacklustre economic conditions as some of the reasons behind the declines.

The PMI survey also found a lack of new work to replace completed projects, with total new orders falling for the fourth month in a row, albeit at the slowest pace since August.

But there was better news when it came to business expectations for the year ahead, which picked up from a low in October but remained weaker than those seen in the first half of the year.

Dr John Glen, chief economist at the Chartered Institute of Procurement & Supply (CIPS), said, “There is no doubt that 2023 has been a difficult year for the UK construction sector. Inflated borrowing costs and falling demand have conspired to further slow new building this month.

“Despite this, the sector has finally emerged from a period of intense supply chain pressure and prices are now falling across the board, especially for timber and steel. Projects are no longer being delayed due to unexpectedly high material costs with November seeing the sharpest reduction in purchasing prices since July 2009.

“There will be no quick fixes next year for the sector. Lower demand, elevated interest rates and the prospect of an election promise an uncertain start to 2024. This is a challenging moment for suppliers in the sector, who may have tough price negotiations ahead.”