Construction output rises in August, but new orders fall

UK construction companies saw a small increase in total business activity during August, with growth in the commercial and civil engineering segments helping to offset a slump in house building.

low res builders on building site sstock

That said, activity forecasts for the year ahead were the weakest since January, largely due to falling sales volumes across the  sector, and the fastest decline in new orders for just over three years.

At 50.8 in August, down from 51.7 in July, the S&P Global / CIPS UK Construction Purchasing Managers’ Index®
(PMI®), shows just how slight the increase is.

Commercial building continued to expand at a robust pace (index at 54.2), with the rate of growth holding close to July’s five-month high. Civil engineering activity (52.4) also increased, at its slowest pace since April.

House building was the weakest-performing part of the construction sector (40.7), with the downturn the second-fastest since May 2020.

Suppliers’ delivery times for construction products and materials meanwhile improved at a robust pace. The respective index eased slightly since the previous month, but was still the second-highest since April 2009. Survey respondents widely commented on improved stock availability and fewer pressures on supplier capacity.

Tim Moore, Economics Director at S&P Global Market Intelligence, which compiles the survey said: “UK construction companies experienced another slump in house building activity during August as rising interest rates and subdued market conditions resulted in cutbacks to client demand and new build projects in particular. Aside from the pandemic, the recent downturn in residential work has been the steepest since spring 2009.

“Resilient demand for commercial work and infrastructure projects are helping to keep the construction sector in expansion mode for now, but the survey’s forward-looking indicators worsened in August. Total new orders decreased at the fastest pace for more than three years amid worries about the broader economic outlook and the impact of elevated borrowing costs. Rising risk aversion also meant that construction firms pared back their own output growth projections, with business activity expectations slipping to the weakest since January.”

About Fiona Russell-Horne

Group Managing Editor across the BMJ portfolio.

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