UK construction activity faces persistent slump as housing starts fall

The UK construction sector continues to face significant headwinds, with recent data indicating a persistent slump in activity, particularly within the residential sector. According to analysis from Glenigan, construction starts for projects valued under £100m fell by 20% year-on-year in the three months leading to August 31. While the rate of decline has slowed compared to earlier in the year, suggesting the downturn may be leveling off, housing remains a major drag on the industry.

Residential construction starts dropped 36% compared to the previous year, with private housing seeing a 37% decline and social housing falling by 30%. Factors contributing to this slump include weak house sales, high building costs, and the upcoming building safety levy.

Complementary data from the S&P purchasing managers' index (PMI) shows that construction activity declined again in August, remaining below the 50 mark that distinguishes expansion from contraction. Industry experts note that while non-residential construction has shown some resilience, the broader sector is “treading water” due to high borrowing costs, slow planning approvals, and economic uncertainty ahead of the upcoming Autumn Budget.