Activity in Britain’s construction sector has plunged to its lowest level since the pandemic casting further doubt over the government’s ambitious house building targets.
Last month, Angela Rayner warned there was “no excuse” not to meet her goal of 1.5m new homes, while Sir Keir Starmer doubled down on the pledge, committing to the creation of a generation of new towns with spades in the ground before the next election in 2029.
But the latest S&P Global construction purchasing managers’ index (PMI) - which measures the activity level of purchasing managers in the construction industry - showed a reading of 44.6 in February, down from 48.1 in January.
The poll’s gauge of housebuilding dropped to 39.3, down from 44.9 in January, one of the sharpest downturns on record.
Aside from the pandemic, it marks the worst decline since early 2009, in the midst of the global financial crisis, with companies citing a weak housing market and high borrowing costs.
The Considerate Constructors Scheme (CCS), which supports and represents builders, said the figures “are just more evidence” that show the government’s housing targets are unattainable.
Most economists had expected activity to rebound to 49.7 in February, just below the 50 mark that separates growth and contraction.
The fall was driven by steep declines in housing and civil engineering, while cost inflation also hit its highest point in nearly two years.
Although Sir Keir has said ministers are “urgently using all levers available to build the homes we need so more families can get on the housing ladder”, the CCS has warned the government’s major infrastructure projects are at risk because of a black hole in recruitment.
“We’ve been warning that the government’s current housing targets, as well as its other ambitious infrastructure goals, are unattainable unless more action is taken to support and resource the industry”, Amit Oberoi, group chief executive of the CCS, told The Independent. “These figures are just more evidence that supports that.”
“We don’t just need people to replace those we’re losing from the industry, we also need to recruit to meet the new regulations the trade is subject to because of the Building Safety Act.
“Without a clearer plan for recruitment and better financial incentives, there’s no chance of achieving the biggest housing push since the post-war period”, he added.
Meanwhile, Brenna Baye, head of construction at the Edwin Coe law practice, warned that the sector needs more resources.
“We have an ageing talent pool, less staff and less skills. That is also causing stoppages, extra costs and delays. We have to get back to shouting about how great working construction is”, she told The Independent.
“We have definitely seen more insolvencies. That is a collision of all the above things coming together. Costs are rising, people want the lowest prices possible when building and then suddenly inflation goes up and companies get trapped.”
The 1.5m homes target means building an average of 300,000 new homes a year – a figure not achieved since the 1970s.
The latest S&P Global figures come despite government moves to boost the development of new homes.
Last month, the government announced that up to 10,000 more apprentices will be able to qualify per year by shortening the minimum duration of apprenticeships from 12 months to eight and scrapping compulsory maths and English qualification requirements for candidates.
Ministers have also introduced mandatory planning targets to ensure local authorities build in line with the government’s national targets.
Tim Moore, economics director at S&P Global Market Intelligence, said: “Weak demand conditions were attributed to entrenched caution among clients, against a backdrop of subdued consumer confidence and lacklustre economic performance.
“Aside from the pandemic, total industry activity decreased at the steepest pace since December 2019.
“This was led by considerable reductions in residential building and civil engineering work, while a degree of resilience was reported for commercial construction activity.
“Survey respondents widely cited a lack of new work in the house-building segment, due to soft market conditions and the impact of elevated borrowing costs.”
Companies also pointed to falling employment, ahead of the minimum wage and employer taxes rising at the start of the new financial year in April.
Labour increased employer national insurance contributions (Nics) in the October Budget, designed to fund improvements to public services. But the rise in costs also resulted in more job cuts, with builders saying the rate of staff reductions was the sharpest since November 2020.
The growing overheads also pushed inflationary pressures to climb to their highest point since March 2023, stretched even further by higher raw materials, energy and transport prices.
Civil engineering activity was also at its weakest in more than four years, while commercial builders saw a more modest decline.
A Ministry of Housing, Communities and Local Government spokesperson said: “We have inherited a dire economic situation and an unprecedented housing crisis, and we can only fix these by going for growth.
“That’s why work is underway to get Britain building again and overhaul the broken planning system, so we can deliver 1.5 million new homes as part of our Plan for Change.
“As part of this we are investing £5 billion in housing for this year, deciding 150 planning applications for major infrastructure over five years, and introducing a new Planning and Infrastructure Bill to accelerate the delivery of critical infrastructure. This is alongside decisive action to build up essential skills in the construction industry.”
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