UK commercial construction activity drops in August
As the UK economy starts to struggle, the impact is now being felt in the commercial construction sector too. In the month of August, there was an overall drop in the amount of construction activity taking place. We’re going to delve into exactly what’s happening and the reasons behind this drop in activity and demand below.
Latest data shows a drop in UK commercial construction activity
In August, and for the second consecutive month, commercial construction activity dropped in the UK. This is measured via what’s known as The S&P Global/Cips UK construction purchasing managers’ index. It dropped below the 50 level, which is considered a contraction in the economic activity of the sector and reflects the worries lots of people currently have about the economy.
High prices are hitting construction demand
One of the major issues for business right now is high prices. Supply chains have still not fully recovered from lockdowns and pandemic disruption. At the same time, energy costs are rising in most western countries, leading to higher operating costs. As a result, the demand for new construction projects is falling as businesses don’t have the cash to make such decisions.
Construction companies want support for rising energy prices
One thing that’s clear and is being heard across the commercial construction sector is that support needs to be provided to small and medium-sized businesses that are struggling with the realities of rising energy prices. If that support arrives from the new government now in place, it should result in a slightly more manageable winter for most businesses, and commercial construction companies will hope to feel the knock-on benefit from that.
Companies may look more keenly for ways to cut construction costs
Of course, there are still lots of construction projects in the commercial sector that are going ahead and will continue to go ahead. Many will have been in the works and planning stages for a long time already. Even so, those projects might cut back, make plans more modest and look for other ways to cut construction costs. For example, a utility locator service can be used as a precaution to prevent damage to underground infrastructure which would cause costs to rise further.
Business confidence going into 2023 is an important factor
Business confidence is clearly something to keep an eye on as we head into the end of the year and the start of 2023. Consumer confidence is already at a low as a result of unprecedented inflation and rising energy costs. Businesses are also very nervous as well, so this is something that analysts will be watching closely in the months ahead.
As you can see, there are many different factors in play when it comes to the health of the construction industry and the commercial construction sector in particular. It reflects wider fears in the economy about rising prices, inflation and the energy crisis in particular, as well as general economic worries heading into the next few quarters.