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UK construction expansion slows up

Growth in the UK construction sector was sustained in July, according to the Markit/CIPS Construction Purchasing Managers’ Index. However, the rate at which it improved has slowed from the previous month.
The latest reading, at 54.1 was below June’s rate of 58.1, with all of the three broad UK construction sub-sectors showing a weaker rise in activity during July.

Residential construction continued to be the strongest performing of the three, although its latest expansion was the slowest in five months. The latest increase in commercial construction eased only marginally in the month. However, the slowdown in the civil engineering sub-sector was notable, with only a slight increase in activity recorded.

UK construction companies reported a further rise in new business received during July – the fifth increase in as many months. However, with more panellists indicating that new orders had fallen in July compared to in the previous month, the rate of expansion slowed to the weakest since March.

Nonetheless, the overall rise in new work intakes supported further growth in activity, albeit at a weaker pace.

UK construction companies remained optimistic over future business expectations during July. Many panellists commented that they expect ongoing economic improvements to boost activity over the coming year. However, the degree of positive sentiment was the weakest in fifteen months, dampened by impending cuts in government spending.

David Noble, chief executive officer at the Chartered Institute of Purchasing & Supply, said: “Although we’ve seen a marked slowdown in growth for the UK construction sector, the warning bells aren’t ringing yet and an immediate double-dip seems unlikely. Instead, we’re finally starting to see the growth in activity tail-off and normalise at a slightly slower rate.

“Nonetheless, despite rises in new orders and output, it’s telling that contractors accommodated the slowdown by making immediate job cuts – reaffirming how tight things still are. In the face of ongoing public sector spending cuts and steep input price inflation, it’s really going to be a case of slow and steady wins the race. The industry has to come to terms with a much altered, post-recession landscape, where full recovery may take some time yet.”

About Fiona Russell-Horne

Group Managing Editor across the BMJ portfolio.

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