UK construction activity fell last month at the sharpest rate since the height of the Covid pandemic amid a collapse in housebuilding, underscoring the challenge facing Labour to meet its 1.5m new homes target.
Adding to pressure on the government, the figures from S&P Global Market Intelligence showed activity in the sector fell in July at the steepest pace since May 2020, during the first UK coronavirus lockdown.
The data provider said a sharp drop in residential building pulled down its monthly purchasing managers index (PMI) for the UK construction sector as a whole, alongside a plunge in civil engineering and softer downturn in the commercial sector.
Compiled from a survey of about 150 construction firms, the survey is closely monitored by the Treasury and the Bank of England for early warning signs from the economy.
Threadneedle Street is widely expected to cut borrowing costs on Thursday as concerns mount over the strength of the economy amid rising unemployment, sticky inflation, two months of shrinking output in April and May, and the hit to global trade from Donald Trump’s latest round of import tariffs unleashed last week.
The UK services sector recorded its biggest drop in new orders in almost three years last month, figures published on Tuesday showed.
Financial markets put the odds of a quarter-point reduction at 95%.
Joe Hayes, principal economist at S&P Global Market Intelligence, said: “Forward-looking indicators from the survey imply that UK constructors are preparing for challenging times ahead.
“Anecdotally, companies reported a lack of tender opportunities and a hesitancy from customers to commit to projects. Broader themes of uncertainty, both domestically but also internationally, will do little to reignite investment appetites.”
