UK construction growth slows over the Summer

An unexpected sump in construction growth  was reported by the latest Markit/CIPS Construction Purchasing Managers’ Index (PMI) survey which fell to 51.1 from 51.9 in July, closer to the 50 mark that indicates stagnation.  

Housebuilding was the only construction sector to generate significant growth during August, the PMI showed.  Reduced levels of commercial work were a key source of weakness, which offset the robust growth in residential building. There were also signs of a sustained soft patch ahead, with new business volumes falling for the second month running. Survey respondents linked subdued demand to reduced business investment and heightened economic uncertainty.

New orders across construction as a whole fell for a second month, albeit not as sharply as in July.

Civil engineering activity was broadly flat, while the commercial construction sector contracted at the fastest pace since July last year – just after the vote for Brexit.

“UK construction companies indicated that lacklustre growth conditions persisted during August. Civil engineering work stagnated, which meant that the construction sector was reliant upon greater house building activity to deliver an outright expansion in output volumes. Commercial development remained by far the worst performing category, with business activity falling at the fastest pace since July 2016.

“Survey respondents noted that subdued business investment and concerns about the UK economic outlook had led to a lack of new work to replace completed projects, especially in the commercial building sector.

“There were signs that UK construction firms are bracing for the soft patch to continue into this autumn, with fragile business confidence contributing to weaker trends for job creation and input buying during August.”” Tim Moore, associate director at IHS Markit, said.

About Fiona Russell-Horne

Group Managing Editor across the BMJ portfolio.

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