Home construction drops for the first time since May 2020


The housing sector posted a reading of 49.3 last month, below the 50.0 mark unchanged, signaling the first drop in residential work since May 2020.

Duncan Brock, group director of the Chartered Institute of Procurement & Supply, said: “Homebuilding levels have fallen for the first time since May 2020, and builders have an increasingly bleak view of the market in which they currently operate. , as overall business growth also fell sharply.

Across the industry, construction posted a reading of 52.6 in June, above the stable threshold for the seventeenth consecutive month, but it is the slowest rate of expansion since September 2021.

The report comes after the Bank of England raised interest rates five times in a row since December to 1.25% and inflation hit 9.1% in May, a 40-year high. Many economists predict that the UK will enter a recession within the next 12 months.

Civil engineering was the most resilient subsector in June, at 54.3, down slightly from 55.5 in May, according to the construction report. Commercial sector work saw its growth rate slow sharply to its lowest level so far this year at 54.3, from 59.8 in May.

The report said growth in overall new orders last month slowed to its weakest rate since October 2021.

He adds: “Some construction companies have noted a lack of new work to replace completed projects due to economic uncertainty and inflation concerns.”

The study says 71% of its panel reported higher purchase prices in June, while only 1% reported a reduction, “higher prices paid primarily reflecting higher energy, fuel and transport”.

He adds that business optimism was at its lowest since July 2020.

“A decline in business confidence has been recorded for five consecutive months, largely reflecting the subject’s growth expectations for the UK economy, as well as uncertainty over the impact of rising interest rates. and escalating inflationary pressures,” the survey said.

Tim Moore, Chief Economics Officer at S&P Global Market Intelligence, said: “The gloomy UK business outlook and worsening consumer demand due to the cost of living crisis have combined to dampen the growth of construction in June.

“Housing construction has grown faster than the rest of the construction sector during the pandemic, but now finds itself as the worst performing overall category so far in 2022. Additionally, the latest survey has indicated an outright decline in residential work for the first time in just over two years.

“Construction companies appear poised for a tough second half as new order growth and business activity expectations fell again in June, reflecting fears of inflation, higher interest rates and less favorable domestic economic conditions.”

Naismiths national property manager Gareth Belsham adds: ‘Housebuilders, once the star children of Britain’s post-pandemic building boom, have been at the back of the class for four consecutive months . Residential construction is now contracting for the first time since the darkest days of the first lockdown in 2020.

“Housing construction is more directly exposed to consumer confidence than any other construction sector; and it’s clear that some home developers are easing off the accelerator pedal in response to the slowing economy and the rising cost of mortgages.

“As production continues to increase in infrastructure and commercial property construction, the pace is steadily slowing – and the overall expansion is now weaker than it has been since last September.

“With some companies struggling to find new orders to replace completed work, business confidence is starting to plummet – and it has now fallen for five months in a row. Barely a third of construction companies s expect an increase in business activity in the coming months, with sentiment only a shadow of what it was during last year’s labor surge.

“Nevertheless, many contractors are actively recruiting new employees – a sign of optimism for the future – and as commodity prices continue to rise very rapidly, availability is improving and project delays are decreasing.

“The first half of 2022 has been challenging to say the least, and with the twin risks of inflation and insolvency looming ever larger, the second half could be even tougher.”


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