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Wed September 30 2020

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Construction recovery starts to falter

2 Sep 11 The UK construction industry continued to register activity growth in August but at a slower rate than July.

That is the main finding of the latest seasonally adjusted Markit/CIPS Construction Purchasing Managers’ Index (PMI).

The PMI score of 52.6 was down from July’s 53.5. Anything over 50 indicates growth, but the August figure was the lowest reported for eight months.

An improved performance from the commercial building sector was outweighed by a weaker rise in civil engineering work. Housing, meanwhile, continued to post a contraction of activity. However, the rate of decline in residential building eased slightly since July.

August data showed that contractors continued to win new work, bringing the current run of growth to one-and-a-half years. However, the inflow of new work to the sector was the least marked since January. Panel member reports suggested that competition for new business had strengthened.

Confidence was at its lowest for eight months and well below the series trend, although more than 34% of UK contractors anticipate growth in the next year.

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Both employment levels and sub-contractor usage continued to fall during the latest survey period, which respondents linked to either lower workloads or expectations of weaker market demand. The decline in trade contractor usage was the more pronounced, although both variables decreased at sharper rates than in July.

Lower demand for sub-contractors resulted in a rise in their overall availability in August, although curtain wallers, external renderers and mechanical & electrical workers were all reported to be in short supply. Trade contractor rates continued to rise, on average, although at a slower rate).

Market economist Sarah Bingham, author of the report, said: “August data signalled slower growth of both output and new orders as headwinds caused by uncertain economic conditions impacted on sector performance.

“Confidence regarding future business expectations weakened to an eight-month low, highlighting concerns in respect of further potential cuts in government spending, but also a dampening of wider business sentiment, which may act to reduce investment on construction projects. Another month of job cuts again reinforced lower confidence over future activity levels within the construction sector.

“A further marked rise in input costs faced by constructors was again recorded in August, suggesting that overall operating conditions remain tough, especially as strong competition for tender opportunities remained.”

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