Costs crisis puts brakes on house building
The construction industry has suffered its worst downturn since the first months of the pandemic after a sharp downturn in house building.
Rising borrowing and general living costs drove the building of new homes in January to its lowest rate since May 2020, according to the influential S&P Global/CIPS construction purchasing managers' index.
Dr John Glen, chief economist at the Chartered Institute of Procurement and Supply, said: "The wrecking ball of higher inflation and interest rates has knocked the UK's residential building output to its weakest since May 2020.
"Stretched mortgage affordability has impacted the building of new homes."
The data comes days after the Bank of England lifted interest rates again to four per cent in a bid to tackle sky-high inflation.
The monthly survey says companies attributed the fall in housing volumes to "rising borrowing costs, unfavourable market conditions and greater caution among clients".
Meanwhile, commercial construction activity declined for the first time in five months due to delays in decision-making on new projects.
But the report also shows that many builders were more confident about the outlook for 2023.
Tim Moore, economics director at S&P Global Market Intelligence, said: "There were positive signals for longer-term prospects across the construction sector.
"For some firms, the recovery in business optimism was driven by signs of a turnaround in new sales inquiries at the start of 2023.
"Other construction companies have noted gradual improvements in the general economic outlook.”