Activity in Britain's construction sector fell at its fastest pace in six years last month, as economic uncertainty and rising inflation hit demand for new work, a key survey revealed.
S&P Global's monthly purchasing managers' index for the construction sector dropped to 38.2 in May from 39.7 in April - its lowest reading since May 2020, when the Covid-19 pandemic had brought many projects to a halt.
Joe Sullivan, Partner at MHA, said: “Today’s construction PMI were worse than feared and point to a sector that remains under significant pressure, as construction activity continues its downward trajectory. Activity is still firmly in contraction territory, and there doesn't seem to be any light at the end of the tunnel for the industry.
"Across the market, the issue is less about capacity and more about confidence, with clients continuing to delay projects and push decisions further down the line which given the UK and global economic uncertainty is hardly surprising. Order books continue to dwindle and while some may exist on paper, many schemes are not progressing at the pace businesses need.
“Housebuilding remains one of the weakest parts of the sector, as affordability pressures, weaker buyer confidence and subdued demand continue to weigh on activity. Larger developers are likely to keep scaling back in response to market conditions, while smaller firms may face even tougher decisions as they balance reduced selling prices against the need to service debt.
"Commercial construction is also subdued, with many projects effectively on pause as uncertainty continues to affect investment decisions. By contrast, infrastructure work is holding up better, offering some resilience in an otherwise fragile market but activity still remains weak.
“Cost pressures have not returned to the extreme levels seen during the pandemic, but the demand is more limited and volatility in input costs still poses a real risk, particularly for firms operating on fixed-price contracts.
"At the same time, labour remains a concern. In an uncertain market, many businesses will be reluctant to replace workers as they leave, but that creates a longer-term challenge if activity picks up and skills are harder to find. Overall, the sector remains in a difficult position, and unless confidence improves materially, these pressures are likely to persist for some time yet.”
Among its UK-wide locations, accountancy and business advisory firm MHA has offices in Aberdeen and Edinburgh. For further information, visit www.mha.co.uk