The UK construction industry unexpectedly shrank in June as the slump in housebuilding deepened with a further rise in borrowing costs.
(Bloomberg) — The UK construction industry unexpectedly shrank in June as the slump in housebuilding deepened with a further rise in borrowing costs.
S&P Global said its overall PMI index for the sector dropped to 48.9 from 51.6 in May, below the neutral 50 for the first time in five months. The reading was far worse than the 51 economists had forecast.
The decline came as residential building work dropped at a pace last seen during the pandemic and the global financial crisis 14 years ago as developers scaled back projects.
“Survey respondents widely commented on weaker demand due to rising borrowing costs and a subdued outlook for the housing market,” S&P said.
Speculation the Bank of England will have to keep raising interest rates to get a grip on inflation is inflicting further pain on consumers already struggling with higher food and energy bills. Key mortgage rates are now above the 6% considered a pain threshold, adding hundreds of pounds to the average monthly home loan.
Kelly Boorman, the national head of construction at RSM UK, warned that the slowdown in housebuilding will result in a “chronic lack” of supply, making it harder for younger generations to get on the housing ladder.
There was better news on civil engineering and commercial building, which both expanded at a solid pace last month, the survey found.
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