LONDON (Reuters) – Britain’s construction sector shrank at its fastest pace since the start of the COVID pandemic as borrowing costs rose, according to a survey published shortly before the Bank of England is expected to keep interest rates at a 15-year high.
The Royal Institution of Chartered Surveyors (RICS) said a net balance of 10% of respondents reported a fall in activity in the three months to September.
That represented the weakest reading since the early months of the coronavirus pandemic. Excluding that period, the last time the balance was as weak was in the third quarter of 2010.
While home-building contracted, infrastructure and public works activity continued to grow.
“The tougher environment around the housing market is now coming through in terms of a slowing in the build-out rate of new developments,” RICS Chief Economist Simon Rubinsohn said.
“This suggests that housing supply is likely to fall at least for the next year compounding the problems already being faced by many of those looking to get a first step on the property ladder or move into the rental market.”
Britain’s property market boomed during the COVID pandemic, helped by a tax cut for home buyers as well as demand for larger homes. But it has cooled after a long run of interest rate increases by the BoE.
The central bank is expected to leave interest rates on hold on Thursday and signal its intent to keep them high – compared with their rock-bottom levels of much of the last 15 years – as it continues to grapple with inflation running at nearly 7%.
The most recent official data showed construction output fell 0.5% in August but was 2.3% higher than a year earlier.
(Writing by William Schomberg; editing by David Milliken)