UK housebuilding slows as construction sector hits longest downturn since pandemic

Residential housebuilding activity in the UK slowed in August, according to S&P Global data released Thursday, marking another setback to the government’s plan to deliver 1.5 million new homes by 2029.

S&P Global’s UK construction purchasing managers’ index showed residential activity slipped to a reading of 44.2 in August — well below the 50 mark that separates expansion from contraction — as overall construction output declined for an eighth consecutive month. The latest official data published on Wednesday showed just 38,780 new homes were completed between January and March this year, leaving the programme more than 36,000 homes short of the three-month pace required to meet the target.

Meeting the 1.5 million homes commitment by 2029 would require roughly 300,000 completions a year, or about 75,000 every three months. The latest quarterly completion total of 38,780 is just over half the number needed in each three-month period to stay on track for the five-year target.

"Things have gone from bad to worse for housebuilders, with residential construction output falling at its fastest rate since February," said Gareth Belsham, director of Bloom Building Consultancy. His comment accompanied the S&P Global release and reflected the sector’s extended weakness.

The construction PMI reading is part of a broader sequence of soft data for the industry. Analysts said the eighth successive monthly decline in output is the longest stretch of contraction the sector has recorded since the early stages of the COVID-19 pandemic. The residential component’s fall highlights particular pressure on developers and contractors tasked with delivering new homes.

Housing Minister Angela Rayner set out the government’s objective of delivering 1.5 million new homes by 2029 after the Labour Party took office. The pace implied by that pledge has required a sustained and substantial uplift in building activity; the recent official completions figures and the S&P Global index indicate the current pace is materially behind what is needed.

Political and industry attention has turned to how ministers and developers will respond to the shortfall. The government has previously pointed to measures including planning reforms, investment incentives and support for housebuilding to boost supply, while industry groups have cited labour shortages, rising costs and planning delays as constraints.

The S&P Global reading will be monitored alongside forthcoming official releases on planning approvals, starts and completions to gauge whether the sector can accelerate output. For now, the data underline the challenge facing policymakers and builders if the government’s 2029 target is to remain attainable.