Building firms suffered a squeeze on activity for a second month in a row during August as new orders slowed to their lowest level since the summer of 2020 in the latest sign that a UK recession is looming.
With inflation at a 40-year high, construction businesses reported that their customers were putting new work on hold, forcing them to stop buying materials and hiring staff.
S&P Global’s construction sector index showed activity depressed last month, after an even steeper fall in July. The Cips UK construction purchasing managers’ index was 49.2 in August, after a reading of 48.9 in the previous month. A figure below 50 indicates the sector contracted.
Andrew Harker, the economics director at S&P Global Market Intelligence, said the sector “looks set to be in for a challenging period”.
Civil engineering was the hardest hit over the two months combined, while commercial building also experienced a reduction in activity. Only housebuilding enjoyed a lift in August, but that was too modest to push the rest of the industry into growth.
Harker said despite the August increase in activity, housebuilding was in a period of stagnation and the only silver lining was that employment remained strong.
Gareth Belsham, a director of the national property consultancy Naismiths, said the construction sector was a “canary in the coalmine” for the rest of the economy.
“As the recessionary vice begins to close on the UK economy as a whole, the construction industry’s brakes are being squeezed harder and faster than most,” he said.
Andrew Wishart, the senior property economist at the consultancy Capital Economics ,said a drop in demand by the leisure and hospitality industry for new work as the cost of living crisis spilled over to the demand
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