Businesses start to delay new contracts as slower growth and cooling property market dents business confidence
Housebuilding fell to its lowest level in a year in October amid signs that Britain’s recovery is slowing down and the property market is cooling.
While demand remained strong, Markit’s closely-watched survey showed some businesses were delaying new contracts as slower growth dented business confidence.
“Some survey respondents commented that less favourable housing market conditions had resulted in greater caution among clients and delays to the launch of new development projects,” Markit said.
The Markit/CIPS construction PMI eased to 61.4 in October, from 64.2 in September. While this was well above the 50 mark that divides growth from contraction, it was below economists’ expectations for a fall to 63.5 and the weakest reading since May.
The survey revealed declines in all three sub-categories of construction last month. Civil engineering was weakest performing area, while commercial activity fell to a five month low.
“October’s survey provides the first indication that the chill winds blowing across the UK housing market have started to weigh on the booming residential building sector,” said Tim Moore, an economist at Markit.
“House building activity still increased at a strong pace overall, but the sharp growth slowdown since this summer reflects greater caution towards new development projects amid tighter mortgage lending conditions and renewed uncertainties about the demand outlook.”
Official data this month showed the UK economy expanded by 0.7pc between July and September, following growth of 0.9pc in the previous quarter. Recent data have shown house prices and mortgage approvals are slowing amid tighter regulation.
Last week, Nationwide, Britain’s biggest building society, reported that mortgage approvals in September were 20pc down on levels at the start of the year when the recovery in the housing market was in full swing.
However, Markit highlighted that higher levels of business activity had been recorded for 18 consecutive months, which is the longest continuous period of growth since the onset of the 2008 financial crisis. However, activity remains well below its pre-crisis peak.
The data follow figures published on Monday that showed UK manufacturing activity bounced back in October, as strong domestic demand offset a fall in export orders amid continued weakness in the eurozone.
Economists said the prospect of interest rate rises had also hit sentiment. “Developers seem to be increasingly cautious about new projects following a slip in buyer and builder confidence in the future prospects of the industry, falls in mortgage approvals and the belief that borrowing costs are to rise soon,” said Jeremy Cook, chief economist at World First.
Declines in all three sub-categories of construction were recorded last month (Source: Markit)
Official figures this month showed the construction industry expanded by 0.8pc in the third quarter compared with the previous quarter, despite contracting by 3.9pc in August.