UK construction output growth slows in July

MarkitA loss of momentum in housebuilding and civil engineering has slowed the pace of growth in Britain’s construction industry, according to a survey published today.

The monthly Markit/CIPS UK construction purchasing managers’ index (PMI) fell to 57.1 after hitting a four-month high of 58.1 in June.

The slowdown may have reflected an easing of the surge in confidence among construction firms that followed May’s unexpectedly conclusive national election, survey compiler Markit said.

Residential building remained the fastest growing broad area of the construction sector, however, it also saw the greatest loss of momentum since June, with the latest upturn in housing activity the second slowest since June 2013. Civil engineering activity also expanded at a slower pace in July. Meanwhile, work on commercial projects bucked the overall slowdown, with activity rising at the fastest rate since March.

Meanwhile, there were signs that some supply chain pressures have started to subside, as construction companies were the least downbeat about vendor performance since May 2012.

Nonetheless, strong underlying demand for construction materials and low stocks at suppliers continued to drive up input prices in July, with the overall rate of cost inflation reaching its highest level since March.

Looking ahead, UK construction companies are highly upbeat about their growth prospects over the next 12 months, with more than half (55 per cent) expecting an increase in business activity and only 4 per cent forecasting a reduction. However, the resulting Future Business Activity Index was down from June’s 11-year high and the lowest since April.

“Commercial activity was a key growth driver during July, which partly offset ongoing weakness in civil engineering and softer residential building trends,” Markit senior economist, Tim Moore, said.

“Survey respondents commented on a variety of growth constraints afflicting the residential building sector, including long lead-in times for new projects, scarce supplier capacity, skill shortages and stretched sub-contractor availability.”

Construction firms took on fewer staff in July, although Markit said this was still higher than the historical average.

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