Weak UK performance

UK construction’s weakest performance in a year has been reported in the latest HIS/CIPS UK construction PMI (purchasing managers’ index), with a marginal increase in overall construction activity.

The survey found that a robust rise in housebuilding had been offset by a marked fall in commercial work, while new business declined for the second month running.

The data was compiled from 11 to 30 August by research firm IHS Markit and the UK’s Chartered Institute of Procurement & Supply (CIPS), and is based on data compiled from monthly replies to questionnaires sent to purchasing executives in more than 170 construction companies.

The August survey data showed that the UK construction sector continued to experience a slowdown this summer. It found that reduced levels of commercial work were a key source of weakness, offsetting growth in residential building.

The survey was also said to be showing signs of a sustained soft patch ahead, with new business volumes falling for the second month running.

Survey respondents were said to have linked subdued demand to reduced business investment and heightened economic uncertainty.

At 51.1 in August, the seasonally adjusted IHS Markit/CIPS UK Construction PMI remained above the 50.0 no-change threshold for the 12^th month running. However, the latest reading was down from 51.9 in July and pointed to the weakest overall UK construction performance since August 2016. Survey respondents felt a key reason for the slowdown was a lack of new orders to replace completed projects.

Tim Moore, associate director at IHS Markit and author of the IHS Markit/CIPS Construction PMI, said, “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.”

He added, “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.”

Duncan Brock, director of customer relationships at CIPS, said reduced government spending, economic uncertainty and Brexit-delayed decision-making among clients were largely to blame for the slowing in purchasing activity.

“But any further drag on the construction sector overall was halted by the continuing strong performance by housebuilders, defying expectations with a good month,” he said. “The sector was also offered some respite from the ongoing march of rising prices as input price inflation weakened.

“This good fortune in prices is unlikely to continue as suppliers scrabble to match the demand for an increasing number of materials in short supply and delivery times lengthened. Price rises will become inevitable if builders have to compete to get what they need.”

Brock added, “In the near-term future, without those new orders waiting in the wings, the performance of the construction sector is likely to continue to be downbeat.”