The UK's construction sector is facing its longest slump in employment since records began, with 18 months of job shedding now on the books. The industry's woes are being felt far beyond just employee numbers, as subcontractors struggle to find work and their numbers swell. According to S&P Global Purchasing Manager’s Index (PMI) data for June, a perfect storm of factors is driving this downturn: subdued housing sales, higher interest rates, and pressure on consumer finances have all taken their toll.
The PMI reading for June was 38.4, a slight improvement from May's six-year low of 38.2, but still well below the crucial 50.0 threshold that indicates sector growth. While there were glimmers of hope in some areas – such as commercial building work – the civil engineering segment recorded its weakest performance since the pandemic first hit.
House building activity saw a particularly sharp decline, with an individual reading of 35.6 reflecting fewer new build sales, weak investment, and intense competition for orders. This slump poses a significant challenge to the Labour government's ambitious housing targets – just two years ago, it pledged to construct 1.5 million homes in England by the end of the decade.
However, leading house builders have warned that this target is now extremely unlikely, citing measures such as the landfill tax and building safety levy as contributing to increased costs and making it harder for firms to operate profitably. The combination of higher borrowing costs and elevated interest rates has also directly led to a decline in housing market activity, leaving construction firms across the UK struggling to stay afloat.