August data indicated a sustained downturn in business activity across the UK construction sector, led by weakness in the residential building segment.

The seasonally adjusted S&P Global UK Construction Purchasing Managers’ Index  – an index tracking changes in total industry activity – registered 44.3 in August,down from 44.7 in July and below the neutral 50.0 value for the twentieth successive month.

The downturn in residential work (index at 37.6) was sharper than seen elsewhere in the construction sector.

A lack of new business to replace completed projects, alongside intense cost pressures, resulted in another reduction in employment numbers across the construction sector.

Commenting on the latest figures, Tim Moore, Economics Director at S&P Global Market Intelligence, said: “UK construction companies experienced another solid reduction in output volumes, with a faster downturn in house building the main reason for a weaker overall performance during August. A sharp and accelerated drop in residential activity more than offset slower falls in the commercial and civil engineering sub-sectors.”

He added: “Sluggish demand conditions and low client confidence, combined with anxiety about the impact of the Middle East conflict, were again factors contributing to lower workloads across the construction sector.”

Richard Pike, sales and marketing director at Phoebus Software commented: “This is a tough time for the UK housebuilding sector, and today’s figures are a reminder of just how tough. Builders are being squeezed from both sides – costs continuing to rise, while demand is stifled by affordability constraints and higher mortgage rates.

“Construction activity hit a six-year low back in May, and while it had started clawing back some ground over the summer, this fall shows how fragile that recovery really is. And the pressure is only building: gilt yields hit their highest level since 1998 this week, and oil prices are climbing again. Both add to the cost burden housebuilders are already struggling with.”

He added: “Bellway and Barratt Redrow have both called on the government to act – Bellway specifically wants an immediate stamp duty cut alongside a deposit support scheme for first-time buyers – but the new PM seems cool on the idea, and it remains to be seen whether he has the fiscal room to introduce it anyway. Something needs to be done to stimulate demand. Without it, supply will keep contracting in a downward spiral, and today’s figures are a warning sign of exactly that.”