By David Milliken
LONDON (Reuters) - Britain's construction industry saw the biggest slide in activity in more than three years last month, as higher interest rates led to one of the sharpest falls in house-building since the 2008-09 recession, a survey showed on Thursday.
The S&P Global/CIPS UK construction Purchasing Managers' Index (PMI) tumbled to 45.0 in September from August's 50.8, its lowest since May 2020, when COVID-19 pandemic restrictions were in full force and a move further below the 50 level that divides growth from contraction.
Economists polled by Reuters had forecast a much more modest decline to 49.9, and the figure contrasts with the less gloomy picture for the larger services sector on Wednesday.
The all-sector PMI - which includes services, manufacturing and construction - edged down to 48.2 in September, its lowest since January 2021.
"A rapid decline in house building activity acted as a major drag on workloads, with construction companies widely commenting on cutbacks to new residential development projects in the wake of sluggish demand and rising borrowing costs," said Tim Moore, economics director at S&P Global Market Intelligence.
The house-building index dropped to 38.1 from 40.7 - its lowest since April 2009, apart from two months in 2020.
Mortgage lender Nationwide reported on Monday that house prices fell last month at their joint-fastest rate since 2009, although mortgage rates have dropped slightly from August's peak after the Bank of England kept rates on hold in September.
Commercial construction also fell as clients grew more concerned about the economic outlook and civil engineering saw the steepest decline in over a year.
On Wednesday, Prime Minister Rishi Sunak scaled back Britain's biggest infrastructure project, a high-speed rail line between London and Manchester, which will now only reach Birmingham, 100 miles (161 km) from London. Sunak said the 36 billion pounds ($44 billion) saved would be spent on smaller-scale transport projects.
Alongside the weaker activity, the survey showed the biggest rise in subcontractors' availability in 14 years and more stable input costs after steep rises between mid 2020 and mid 2023.
($1 = 0.8247 pounds)