LONDON (Reuters) – Britain’s construction industry suffered a second month of shrinkage in October as higher borrowing costs hit house-builders and worries about the weak economy put clients off new investment, a survey showed on Monday.
The S&P Global/CIPS UK construction Purchasing Managers’ Index (PMI) improved only marginally to 45.6 from September’s 45.0, which was the lowest reading since May 2020 when Britain was under a COVID lockdown.
October’s reading remained well below the 50.0 growth threshold.
The all-sector PMI – which includes surveys for services and manufacturing, which were released last week, as well as construction – inched up to 48.4 from September’s 48.2, its lowest reading since January 2021.
The construction sector has been the most obvious victim so far of the Bank of England’s run of interest rate increases between December 2021 and August this year.
Last week, another survey showed the sector shrank in the three months to September at its fastest pace since the start of the pandemic.
The house-building component of Monday’s PMI improved only fractionally and remained deep in contraction territory. Civil engineering firms also reported a shrinkage.
As new work dried up, confidence levels hit their lowest so far in 2023 on concern about the economy and high borrowing costs. Jobs in the sector grew at the slowest pace since June.
The weakness translated into the biggest fall in prices paid by building firms since August 2009 and rates charged by sub-contractors fell for the first time in over three years, potentially easing some inflation pressure in the economy.
(Writing by William Schomberg; Editing by Hugh Lawson)
