Construction output growth hits 12-month low in August
Growth in the UK’s construction industry slid to its lowest level for 12 months in August, as new orders for commercial work dropped for the second month in a row.
Data from the latest Markit / CIPS Construction PMI, which measures expectations of growth — came in at 51.1 for the month of August.
That was down from an already weak reading of 51.9 in July, and also below the 52 reading expected by economists polled prior to the release.
Reduced levels of commercial work were a key source of weakness, which offset 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. As a result, construction firms exerted greater caution in terms of their staff hiring, with employment numbers rising at the slowest pace since July 2016.
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. 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.”
Cost pressures were the weakest since September 2016. Survey respondents noted that exchange rate depreciation continued to drive up prices for construction materials, but some commented on successful negotiations with suppliers against a backdrop of softer market conditions.
Duncan Brock, director of customer relationships at the Chartered Institute of Procurement & Supply, said: “The sector hit a roadblock this month as purchasing activity slowed for the third month and new business wins were hard to come by.
“Reduced Government spending, economic uncertainty and Brexit-delayed decision-making among clients were largely to blame.
“The struggling commercial sector drove this disappointment, languishing under the pressure with the fastest drop in activity in over a year.
“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.”