UK construction output plummets in November, business confidence erodes, PMI shows

LONDON, Dec 4 (Reuters) - British construction activity contracted last month at the fastest pace since May 2020, with steep falls in civil engineering, residential, and commercial building, partly due to uncertainty ahead of the government's budget, a survey showed on Thursday.

S&P Global's monthly purchasing managers' index for the construction industry fell to 39.4 in November from 44.1 in October, extending its longest downturn since the global financial crisis and remaining well below the 50 mark that divides growth from contraction.

Residential construction activity was at its weakest since May 2020, when lockdowns during the COVID pandemic halted building work.

Activity in the commercial sector in November dropped at the sharpest pace in five-and-a-half years, with its subindex at 43.8. Civil engineering and new orders were also their weakest since May 2020.

"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," said Tim Moore, economics director at S&P Global Market Intelligence.

"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. 

Other recent business surveys have also shown similar concerns about investment, hiring and demand in the lead-up to finance minister Rachel Reeves' annual budget on November 26, which included 26 billion pounds ($35 billion) in tax rises.

S&P Global said the pace of job-shedding accelerated last month, with the employment index at its lowest since August 2020, with firms citing elevated wage costs and less work.

The survey's gauge of optimism struck a nearly three-year low, and cost pressure rose slightly.    

The all-sector PMI, which combines the services, manufacturing and construction sectors, stood at 50.1 in November compared to October's 51.4.

($1 = 0.7525 pounds)

(Reporting by Suban Abdulla; Editing by Toby Chopra)