The UK’s construction firms cut jobs at the fastest rate for four years last month as the sector’s downturn in activity continued, according to new figures.

Amid uncertainty over the UK and global economy, the commercial construction sector declined at its sharpest rate since the start of 2021 in March.

The latest S&P Global construction purchasing managers’ index (PMI) showed a reading of 46.4 in March, improving from the 57-month low of 44.6 it posted in February.

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Economists had predicted a 46.6 reading. Readings above the 50 threshold signals that activity in the industry is increasing, while anything below means it is shrinking.

The figures mean the UK’s construction sector shrank in March – for the third consecutive month – but at a slower rate than in February. This still indicated a weak outlook for the industry.

Tim Moore, economics director at S&P Global Market Intelligence, said: “March data highlighted a challenging month for UK construction companies as sharply reduced order volumes continued to weigh on overall workloads.

“Civil engineering experienced the biggest setback as activity decreased to the greatest extent since October 2020.

“Survey respondents commented on subdued sales pipelines and a subsequent lack of infrastructure work to replace completed projects.”

The data showed that commercial construction remained a stronger part of the sector but still contracted further, with its latest decline marking its weakest monthly reading for more than four years.

The survey found: “Lower business activity was linked to lacklustre UK economic prospects and the impact of rising geopolitical uncertainty on clients’ investment spending.”

Higher payroll costs through forthcoming rises in National Insurance contributions and the National Minimum Wage would add to average cost burdens, the report stated, with the overall rate of input price inflation accelerating to its strongest since January 2023.

Meanwhile, construction order books reduced again on the back of sluggish demand across the market.

The survey also reported a reduction in staffing numbers for a third consecutive month, as the rate of job shedding accelerated to its fastest since October 2020.

Moore added: “Construction companies remained cautious about their year ahead growth prospects, as fewer sales conversions and a third successive monthly reduction in total new work hit confidence levels. Overall business optimism slipped to its lowest since October 2023.

“A lack of new projects, alongside pressure on margins from rising payroll costs, led to hiring freezes and the non-replacement of departing staff in March. The net result was the fastest pace of job shedding across the construction sector for nearly four-and-a-half years.”

 

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