Eurozone’s construction activity downturn eases but UK sees sharp drop

But in the UK, a separate survey painted a gloomier picture, with the sharpest fall in activity for more than five years.

The Hamburg Commercial Bank (HCOB) Eurozone Purchasing Managers’ Index (PMI) posted a score of 45.4 in November. Any score below 50.0 indicates a contraction in activity but it was still an improvement on the score of 44.0 that the survey recorded in October.

November also saw the least pronounced reduction in new orders in the Eurozone since April last year.

All three of the largest Eurozone economies recorded a decline in construction output in November. The strongest decrease once again came in France. Germany saw a slowed pace of decline, while there was also a modest fall in activity in Italy.

While construction employment in France declined and stagnated in Italy, German companies hired more people for the first time since March 2022 amid a surge in civil engineering activity.

Commenting on the PMI data, Dr. Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, said, “The construction sector in the three major eurozone countries remains in recession. Both residential and commercial construction continue to decline almost unabated. In civil engineering, the contraction of the past two months has been virtually halted because this sector has returned to growth in Germany. In our view, the continuing weakness of the construction sector is due to relatively high long-term interest rates, the recent acceleration in construction costs, and the slow progress in simplifying building regulations and speeding up building permit procedures.”

Decline accelerates in the UK

In the UK, buyers reported a sharp and accelerated fall in activity levels across the construction sector.

New orders dropped at the fastest rate since May 2022, when the country was in the grip of the first Covid-19 lockdowns.

The S&P Global UK Construction Purchasing Managers Index (PMI) slipped to 39.4 in November, down from 44.1 in October.

There were rapid downturns in all three sub-sectors of the industry: Housing activity scored 35.4, commercial construction was 43.8, and civil engineering scored 30.0.

Survey respondents reported fragile market confidence, delays with the release of new projects, and a lack of incoming new work.

The proportion of construction companies expecting an upturn in business activity in the next 12 months (31%) narrowly exceeded those forecasting a decline (25%), signalling the lowest degree of optimism since December 2022.

Survey data were collected between 12 and 27 November, during a period of widespread uncertainty around tax rises ahead of Chancellor Rachel Reeves’ Budget on 26 November.

Tim Moore, economics director at S&P Global Market Intelligence, said, “November data revealed a sharp retrenchment across the UK construction sector as weak client confidence and a shortfall of new project starts again weighed on activity. “Total industry activity decreased to the greatest extent for five-and-a-half years, led by steep falls in infrastructure and residential building work. Commercial construction also faced severe headwinds during November as business uncertainty in the run up to the Budget pushed clients to defer investment decisions.”