UK Housebuilding Falls at Fastest Rate in Over a Decade Outside Pandemic Years

The S&P Global/CIPS construction purchasing managers' index (PMI) has shown that UK housebuilding has fallen at the steepest rate in more than a decade in June, outside of the pandemic years, due to high borrowing costs caused by the Bank of England's program of rate hikes in response to stubbornly high inflation.

The residential construction decreased at the fastest pace since March 2020, when the country entered COVID-19 lockdown for the first time.

When the lockdown drop is excluded, last month saw the fastest fall since April 2009, when the economy reeled from the global financial crash.

The survey respondents also identified the subdued outlook for the housing market as an inhibitor.

Samuel Tombs, chief UK economist for Pantheon Macroeconomics, said higher mortgage rates have "triggered a plunge in housebuilding." However, while housebuilding slowed, construction companies said they had increased work on infrastructure projects, and the best performing segment of the industry was civil engineering, in which business activity rose at the second-fastest pace since June 2022.

Additionally, house prices have been falling after a significant rise during the pandemic, but the weak demand, combined with fewer supply bottlenecks, did help improve delivery times for construction services and materials.