Construction growth eases to 13-month low

MarkitThe overall pace of construction growth moderated for the second month running to its least marked since October 2013, data from Markit/CIPS published today reveals.

However, the figures failed to dampen soaring subcontractor rates and demand for skilled staff.

The Markit/CIPS purchasing managers index, which measures the rate of increase or decrease in the activity of purchasing managers, fell to a score of 59.4 in November, down from 61.4 in October, its lowest rating since October 2013.

However, the index remained above the 50 point mark that separates expansion from contraction

The survey found expansion in civil engineering activity in November was the weakest since July 2013 and it also found house building and commercial construction activity both expanded at their slowest rates since October 2013.

Markit said the results did however show “resilient and strong job creation across the construction sector” despite “softer rates of output”.

It also found that costs continued to rise “sharply” in November.

Tim Moore, senior economist at Markit, said: “The construction sector remains a strong growth engine within the UK economy, but momentum has undoubtedly cooled since the summer.

“November’s survey highlights that housing, commercial and civil engineering activity all expanded at the slowest rates for over a year.

He said: “A less favourable overall economic newsflow was cited as the key factor dampening otherwise buoyant demand patterns across the UK construction sector.

“Construction companies responded to rising workloads by boosting their staffing levels at an accelerated pace in November. Moreover, surging demand for skilled construction workers fed through to the steepest increase in subcontractor charges since the survey began in 1997.

Moore added: “Looking ahead, construction firms are optimistic overall about their growth prospects for the next 12 months, reflecting strong confidence that positive spending patterns will continue.

“However, some construction companies noted that uncertainties ahead of next year’s general election had weighed on business confidence and influenced clients’ willingness to commit to new projects.”

David Noble, group chief executive officer at the Chartered Institute of Procurement & Supply, said: “As the UK Government announces more detail around road expansion plans, this may add to the pressure on suppliers and their ability to meet the needs of the sector.

“Though delivery times from suppliers have lengthened, procurement and supply chain managers paint a picture of general optimism amongst the economic doomsayers as the index remains well above the no change mark.

“The one dark spot on the horizon is the danger of prolonged skill shortages across the construction sector.

“As subcontractors are currently in high demand and becoming increasingly costly, the recruitment difficulties experienced by many firms in the sector may need to be addressed sooner rather than later; as the sector has some catching up to do to develop more available skilled labour.”

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