Expansion in the housebuilding sector reached its weakest level in March for more than three years, it has emerged…
The Markit/CIPS construction purchasing managers’ index (PMI) has revealed a slowdown in housebuilding activity, with growth reaching its weakest level since January 2013.
The survey found overall growth in the construction industry hit 54.2 in March, remaining unchanged from February when the sector hit a 10-month low. While a reading over 50 indicates growth, it is undoubtedly concerning for the sector that the figures remained stagnant going into March.
One of the main reasons behind the slowdown is reportedly an uncertainty surrounding the outlook for business. This has put a dampener on client spending, which led to the weakest rise in new work since the run up to the General Election last May.
The index also revealed employment growth also dropped to its slowest pace since June 2013, with many firms maintaining caution over increasing their workforce. The hiring of subcontractors also fell at a slightly sharper pace than in February.
Markit’s senior economist Tim Moore said: “Residential building has seen the greatest loss of momentum through the first quarter of 2016, which is a surprising reversal of fortunes given strong market fundamentals and its clear outperformance over the past three years.
“Construction firms were reliant on a rebound in commercial building and resurgent civil engineering growth to offset the slowdown in housing activity.
“Civil engineering delivered its strongest performance for just over a year, suggesting that a healthy pipeline of infrastructure projects continues to boost construction output.
“However, heightened uncertainty about the business outlook appears to have weighed on overall construction demand so far in 2016, with survey respondents citing cautious client spending patterns and a reduced willingness to commit to new projects.””
However, while the problems facing the sector could be attributed to the uncertainty surrounding the EU referendum vote in June, Samuel Tombs, chief UK economist of Pantheon Macroeconomics warned the issues may be more than worry over Brexit.
He said: “Its weakness in March partly reflects the broad-based decline in business confidence, seemingly related to the risk that the UK might vote to leave the EU in the June referendum.
“The drop in the housing activity index, however, to a three-year low of 50.3 in March, from 53.0 in February, suggests the sector’s problems run deeper than business concerns about Brexit.
“It seems that the stimulus to housebuilding from strong gains in house prices is being offset by sharp increases in labour costs due to skilled worker shortages.”
