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Mon June 21 2021

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Construction growth continues to decelerate

4 Sep 17 The UK Construction Purchasing Managers’ Index dipped again in August indicating a continuing summer slowdown.

Despite the signing of £6.6bn worth of HS2 railway contracts, civil engineering activity was close to stagnation and commercial work dropped at its fastest pace since July 2016.

Residential building was the only area to buck the overall trend in August, with housing activity rising at a robust and accelerated pace since the previous month.

The seasonally adjusted IHS Markit/CIPS UK Construction Purchasing Managers’ Index (PMI) was 51.1 in August, which staying above 50.0 was in growth territory for the 12th month running but was below July’s 51.9 reading and its lowest since August 2016.

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.

Reports from construction industry purchasers widely suggested that clients in the commercial development sector are opting to delay spending decisions and, in some cases, scaling back planned projects.

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Tim Moore, associate director at IHS Markit and author of the survey report, 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.”

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