According to the latest PMI data by S&P and CIPS, the headline construction PMI for October decreased to 44.1, down from 46.2 in September, with the headline index below 50 for the tenth consecutive month.

The main contributors to the monthly downtick were civil engineering and housing activity, which fell to 35.4 and 43.6 respectively. Commercial activity saw a slight fall to 46.3.

Kelly Boorman, National Head of Construction at RSM UK, said: “The headline construction PMI saw a downtick in October, reversing the upward trend from September. This decrease does not reflect seasonal trends, with Q4 typically the busiest period for housebuilders looking to meet pre-Christmas demand. Overall activity remained below 50 for the tenth consecutive month, the longest period of continuous decline since the financial crisis which suggests a rebound is unlikely until Spring next year. Despite slightly improved mortgage availability and expectations of falling interest rates, housing activity also decreased, driven by market uncertainty ahead of the Autumn Budget. We’re seeing contractors stall on project completions in anticipation of fiscal announcements, further tempered by ongoing concerns around unrealistic government housing targets and affordability challenges for consumers.

“Civil engineering has dropped to its lowest level since the pandemic, suggesting that pledges to cut planning red tape and recent announcements around major infrastructure projects are yet to make an impact. While businesses remain engaged on projects, the current pipeline is more indicative of short-term activity rather than long-term confidence, as businesses scale down their delivery to mitigate supply chain shocks and remain commercially viable. Project starts across housing and infrastructure continue to lag, with mobilisation delays, access to affordable debt and persistent labour shortages presenting further challenges.”

She added: “With the Autumn Budget looming, we know speculation and uncertainty around property tax changes are influencing sentiment. As such, we could see a sharper hit to activity in November if clarity around tax and planning reform doesn’t materialise. Delivering on the government’s 1.5m new homes target and long-term growth hinges on the government’s approach to tackling fiscal constraints and planning bottlenecks, so clear policy direction will be key to restoring industry confidence and unlocking stalled development.”

Thomas Pugh, Chief Economist at RSM UK and Ireland, added: “The Construction PMI fell again in October, likely in part due to Storm Amy and Benjamin which will have dampened construction activity in October. What’s more, uncertainty over the upcoming budget looks to be weighing on activity as firms hold off on major projects until the outlook becomes clearer. A direct read of the dismal Construction PMI translates to -1.3% growth in the three months to October for the sector, but the PMI has been far too downbeat of late.

“The employment index also fell again in October, in contrast to the signal from the headline PMI and the official data which had suggested the jobs market was stabilising. Fortunately, it looks like the government has learnt its lesson from last year’s stagflationary budget and will instead focus on deflationary taxes this time around, limiting the harm to businesses.

“A further drop in input prices and a lower peak than expected in inflation should couple with a more deflationary budget than we originally anticipated. As a result, we are growing increasingly confident that further interest rate cuts are in the pipeline. That will help boost demand as mortgages become more affordable and ease financing costs.”

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