An industry expert has warned Rachel Reeves that she should be rethinking her approach after new statistics revealed the sharpest fall in a key economic output for five and a half years. Analysis of the construction sector in November by market data firm S&P Global suggested that activity across housing, commercial and civil engineering dropped to levels last seen during the pandemic. Specialists said that all three construction sub-sectors saw the greatest fall in activity since May 2020, and observed “steep reductions in new orders and employment”. Business optimism was also the weakest since December 2022.

In a blow to the Government’s 1.5million homes target, the report stated that sub-sector data showed that housing activity, commercial construction and civil engineering all experienced the fastest downturns in activity for five-and-a-half years. “Survey respondents commented on fragile market confidence, delays with the release of new projects and a general lack of incoming new work,” the document added.

“Total new business decreased at a rapid pace in November.

“Around 44% of the survey panel reported a fall in new orders, while only 17% signalled an increase.”

Experts also wrote: “Construction companies commented on sales headwinds due to risk aversion among clients, worries about the UK economic outlook and elevated business uncertainty ahead of the Budget.

“Employment numbers across the construction sector decreased for the eleventh consecutive month in November, reflecting a lack of new work to replace completed projects and elevated wage pressures.

“The latest fall in staffing levels was the steepest since August 2020. Subcontractor usage also decreased, as has been the case in each month since December 2024.”

Steven Mulholland, CEO of the Construction Plant-hire Association, told The Express that the data “should be sounding alarm bells in Downing Street”.

He added: “This is not a natural cooling of the market; it is the consequence of a policy environment that has become more expensive, more uncertain and increasingly hostile to the very investment the sector needs.

“Without renewed domestic and overseas investment, we cannot hope to restart the infrastructure and construction growth that underpins an industry employing around 10% of the UK workforce.

“Family-run firms are the backbone of Britain’s construction industry, yet they are being hit hardest by rising employer National Insurance costs and the uncertainty created by recent inheritance tax reforms.

“At a time when the sector needs more than 400,000 additional workers, making it more expensive to hire is a fundamental mistake – and the prospect of higher inheritance tax bills is already delaying investment in the very projects needed to get Britain building again.”

Mr Mulholland then called on the Government to “reset its approach”.

He said: Clear guidance on inheritance tax, reversing the National Insurance rise and setting out a stable long-term tax framework would give businesses the certainty they need to invest, hire and deliver the homes and infrastructure the country urgently needs.”