Construction output growth at lowest level since July 2013

MarkitConstruction buyers reported the lowest level of output growth in the UK for three years in April.

The latest Markit and the Chartered Institute of Purchasing & Supply (CIPS) UK Construction Purchasing Managers’ Index (PMI) saw UK Construction’s PMI fall to 52.0, down from the previous two months’ figures of 54.2 but still above the threshold of 50.0, which indicates growth.

The survey reported that new order volumes also stagnated, meaning that the level of growth in the upcoming months is unlikely to pick up much pace.

In terms of employment, April experienced only slight growth due to low demands but marked the longest period of sustained employment for over a decade, with job creation registered every month since June 2013.

Commercial building was the best performing sector within the industry while civil engineering was the weakest performing category, expanding at the slowest pace seen so far this year.

There was, however, a slight rebound in residential construction after March’s 28-month low figure.

It would appear there is a loss of confidence within the industry about the prospects for the year ahead, with positivity recorded at its lowest for nearly three years.

Tim Moore, senior economist at Markit, said: “UK construction firms reported their worst month for almost three years in April, meaning that the first quarter slowdown is unlikely to prove temporary.

“Stalling new order volumes not only set the scene for further weakness ahead, but are already weighing on staff hiring and input buying across the construction sector.

“Softer growth forecasts for the UK economy alongside uncertainty ahead of the EU referendum appear to have provided reasons for clients to delay major spending decisions until the fog has lifted.

“An additional factor dragging on construction sector performance is the lack of momentum in residential building. April’s survey highlighted one of the weakest rises in housing activity since early-2013, suggesting that greater caution in this sub-sector is adding to the sluggish growth conditions seen across the wider construction industry.”

David Noble, group chief executive officer at the Chartered Institute of Procurement & Supply, added: “Although UK construction grew marginally in April, clouds of uncertainty are hovering overhead, depressing the industry’s outlook.

“Business activity expanded at its weakest pace since June 2013, clearly pointing to a loss of momentum in the sector.

“Fears over weaker UK and global economic growth dealt a blow to confidence in the construction sector, leading to delays in new spending commitments.

“The prospect of the EU referendum and its outcome in June are likely to add to uncertainty too, with many construction firms preferring to wait and see what happens before making any decisions.

“Construction companies adopted a more cautious approach to purchasing and hiring, leading to a rise in subcontractor usage to tide them over until the outlook becomes clearer.

“The slowdown in new order growth in April suggests that though spring may be in the air, sunnier times may still be a way off for the construction sector, at least for the time being.”

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