UK construction sector shows sign of recovery
Activity in the UK construction sector has continued its sustained reduction though the pace of decline was only marginal and much softer than the seven-year record seen during July, a new report has found.
At 49.2 in August, the seasonally adjusted Markit/CIPS UK Construction Purchasing Managers’ Index (PMI) remained below the neutral 50 threshold for the third consecutive month. However, the index was up from July’s 85-month low (45.9).
Sub-sector data pointed to much slower reductions in housing activity and commercial building than those recorded in July. In both cases, the rate of contraction in August was the slowest for three months. Meanwhile, civil engineering activity stabilised in August, following a reduction during the previous month.
Reports from survey respondents suggested that Brexit uncertainty continued to act as a brake on the construction sector during August, especially in terms of house building and commercial work. However, a number of firms noted that sales volumes had been more resilient than expected. Some panel members also commented on signs of a rebound in client confidence from the lows seen earlier this summer. Reflecting this, latest data highlighted that incoming new work decreased at the slowest pace since May.
Tim Moore, senior economist at Markit and author of the Markit/CIPS Construction PMI , said: “The downturn in UK construction activity has eased considerably since July, primarily helped by a much slower decline in commercial building. Construction firms cited a nascent recovery in client confidence since the EU referendum result and a relatively steady flow of invitations to tender in August.
“However, the latest survey indicates only a partial move towards stabilisation, rather than a return to business as usual across the construction sector. There were still widespread reports that Brexit uncertainty had dampened demand and slowed progress on planned developments, especially in relation to large projects. As a result, total new order volumes continued to fall during August, which stands in contrast to the three-year run of sustained growth seen prior to May 2016.
“Despite another month of reduced output, the latest figures can be viewed as welcome news overall after a challenging summer for the construction sector. The move towards stabilisation chimes with the more upbeat UK manufacturing PMI data for August, and provides hope that the near-term fallout from Brexit uncertainty will prove less severe than feared.”