The UK's construction industry experienced its most severe contraction in activity since the initial Covid-19 lockdown last month, as a key survey revealed a dramatic scaling back of building projects and job cuts.
PMI Data Reveals Deep Contraction
According to the closely watched S&P Global Purchasing Managers' Index (PMI), output in the construction sector shrank at the fastest rate since May 2020. The headline PMI figure plummeted to 39.4 in November, a significant drop from October's 44.1 and well below the 44.6 forecast by economists. Any reading below the 50.0 mark indicates a contraction in activity.
This sharp decline represents the most severe slowdown since the pandemic first forced sites to close, and echoes the level of contraction last seen during the 2009 financial crisis. The data poses a direct challenge to the Labour Party's ambitions of boosting infrastructure and building 1.5 million new homes by 2030.
Widespread Weakness and Job Cuts
The downturn was felt across all major construction segments. While house builders have been reducing residential projects for a year due to a subdued property market and high costs, infrastructure and commercial development work also contracted sharply in November.
Survey respondents cited clients deferring investment decisions because of uncertainty surrounding the government's autumn budget and widespread concerns about the UK's economic prospects. Separate research from the Bank of England's Decision Maker Panel, which surveys chief financial officers, found that businesses cut jobs at the fastest annual rate in four years during November, at 1.8%.
Expert Scepticism Over Pessimistic Figures
Some leading economists have urged caution, suggesting the survey results were distorted by the political and fiscal speculation preceding the budget announcement. Robert Wood, chief UK economist at Pantheon Macroeconomics, described the pre-budget environment as "chaotic" and stated, "We find it hard to believe that conditions in the sector are genuinely as bad as during a full lockdown."
Wood pointed out that official construction output data from the Office for National Statistics has been more resilient than the PMI survey this year, and that job postings actually increased in November. Matthew Swannell, chief economic adviser to the EY Item Club, concurred, noting the PMI has been "much more pessimistic than official estimates" and advised that November's weak reading be treated with a healthy degree of scepticism.
