Construction activity declines for first time in 11 months

Activity in the UK construction sector declined in February 2019 for first time in 11 months.

The IHS Markit/CIPS UK Construction Total Activity Index registered 49.5 in February – the first time it has dipped below the 50 no-change mark since March 2018.

Construction activity declines for first time in 11 months

The drop in construction work was led by reductions in commercial building and civil engineering activity. A soft patch for new orders so far in 2019 meant that job creation remained subdued in February.

Survey respondents often cited concerns about a lack of new projects to replace completed contracts.

Residential work was the best performing area of construction activity in February, with growth recorded for the thirteenth month running. However, the rate of expansion was only modest and therefore could not offset the declines recorded for commercial and civil engineering activity. In both cases, the pace of contraction was the steepest since March 2018.

Anecdotal evidence from survey respondents suggested that Brexit uncertainty had slowed decision-making on commercial projects and led to subdued client demand so far this year. There were also reports that low transaction volumes and a general drop in confidence across the housing market had acted as a brake on residential building.

Tim Moore, economics associate director at IHS Markit, which compiles the survey, said: “The UK construction sector moved into decline during February as Brexit anxiety intensified and clients opted to delay decision-making on building projects. Risk aversion in the commercial sub-category has exerted a downward influence on workloads throughout the year so far. This reflects softer business spending on fixed assets such as industrial units, offices and retail space. The fall in commercial work therefore hints at a further slide in domestic business investment during the first quarter, continuing the declines seen in 2018.

“There were also reports that the more fragile housing market confidence has begun to act as a brake on residential work, which adds to signs that house building has lost momentum since the end of last year. This leaves the construction sector increasingly reliant on large-scale infrastructure projects for growth over the year ahead.

“Construction companies pared back their purchasing activity in response to subdued demand in February, but delivery delays for inputs were among the highest seen over the past four years. Survey respondents noted that stockpiling efforts by the UK manufacturing sector had an adverse impact on transport availability and supplier capacity across the construction supply chain.

“On a more positive note, input price inflation held close to January’s two-and-a-half year low. The slowdown in cost pressures from the peaks seen in the first half of 2018 provides a signal that the worst phase has passed for supplier price hikes related to sterling depreciation.”

Mark Robinson, Scape Group chief executive, added: Less than a month until our Brexit leave date, a lack of confidence and anxiety over the future of the UK is continuing to act as a brake on construction work. With just days left on the clock and no deal in sight, our only certainty is further uncertainty. Delayed decision-making and a reluctance to push ahead with projects are damaging the country’s attractiveness, at a time when we need to be demonstrating the strength of our economy to the rest of the world.”

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