Confidence amongst constructors dropped into negative territory last month for the first time since the initial Covid-19 wave and for only the sixth time on record amid expectations of a recession and poor demand conditions, as well as inflationary pressures, according to the latest S&P Global / CIPS UK figures.

Lewis Cooper, Economist at S&P Global Market Intelligence said: “The UK’s construction sector registered a relatively poor finish to 2022, with business activity falling into decline following a three-month growth sequence amid the fastest contraction in new work since the initial pandemic period in May 2020. Companies cited weak client demand, driven partly by higher prices amid ongoing inflationary pressures.

“Commercial construction activity remained the only bright spot, though here the rate of growth came close to stalling, with the overall contraction led by a further sharp decline in civil engineering and the first fall in residential construction activity since last July.

“The challenging environment in December was subsequently reflected in pessimism amongst firms towards activity levels over the coming year, with business confidence downbeat for only the sixth time since the survey began in April 1997. “With the outlook turning negative, staffing levels declined for the first time since the start of 2021 in December. Though panellists primarily attributed the fall to the nonreplacement of leavers, the data show that companies are preparing to face significant challenges in the months ahead.”

Dr John Glen, Chief Economist at the Chartered Institute of Procurement & Supply, said: “The construction sector was stuck in the mud in December with the steepest fall in activity since the beginning of the pandemic in May 2020 and a similarly fast drop in pipelines of new work.

“House building saw a notable change of direction, with a mix of higher inflation for raw materials and transportation and the squeeze on affordability rates for mortgages resulting in fewer house sales. The sector subsequently fell back into contraction for the first time since July. Civil engineering, responsible for larger projects, continued to be the weakest performer again, with a sixth month in the doldrums as uncertainty about the UK economy reared its ugly head again and customers hesitated. Supply chain managers reined back spending on materials with the sharpest fall in buying activity for over two-and-a-half years as a result of this poor demand.

“Optimism remained very flat and at one of the starkest rates in the survey’s history. Builders were reining back on recruitment unconvinced there will be enough growth in the UK economy in 2023 to justify additional expenditure when margins remained so squeezed. Builders are fast running out of the resilient spirit maintained over the last couple of years as the blocks to success piled up and the winter of discontent with high inflation, strikes and shortages continuing.”

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