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Tue April 20 2021

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UK construction growth drops sharply

6 May 15 Growth in the British construction industry fell to a 22-month low in April, with businesses blaming the election for a delay in clients' spending decisions.

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However, jobs continued to be created at a robust pace, despite the slower rise in new orders.

At 54.2, down from 57.8 in March, the headline value of the Markit/CIPS UK Construction Purchasing Managers’ Index (PMI) dropped for the second month running and was the lowest for almost two years. However, the index remained above the 50.0 no-change value and signalled a solid overall pace of expansion.

UK construction companies indicated a sharp loss of growth momentum in April, with output and new order expanding at the slowest rates since June 2013. A number of survey respondents suggested that uncertainty related to the forthcoming general election had contributed to delays in clients’ spending decisions.

However, job creation remained robust in and there were widespread reports of worsening capacity pressures. This contributed to another drop in subcontractor availability and a corresponding increase in subcontractor rates, with the latest rise the fastest since the survey began in April 1997.

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Residential building activity was by far the best performing broad area of construction output during April, although even in this category the pace of expansion slipped to a 22-month low.

A key factor weighing on overall construction output growth was weaker new business gains in April. Moreover, new business growth has now slowed in eight of the past 10 months. Reports from survey respondents suggested that underlying conditions remained favourable, especially in the house building sector, but some clients had delayed spending decisions ahead of the general election.

Looking ahead, business confidence regarding the 12-month outlook dipped from the nine-year high seen in March, but remained stronger than its long-run average.

April data suggested that the worst phase of the downturn in supplier performance may have passed, as the latest lengthening of supplier lead times was the least marked since June 2013.

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