Activity in the UK construction industry slowed to its weakest output in six months in September, according to Markit’s construction PMI
Civil engineering was the worst performing subcategory of construction work, with activity declining at a slightly quicker rate in September. Housebuilding and commercial construction continued to increase at a solid pace, although the latest survey indicated weaker growth than in August. A number of firms suggested that subdued economic conditions so far in 2018 remained a factor holding back business activity growth.
In contrast to the trend seen for construction output, the latest data pointed to a faster rise in new business volumes. The rate of new order growth surged to its strongest since December 2016, which firms attributed to resilient demand and an upturn in new invitations to tender.
A robust rise in staffing numbers was reported in September, helped by another improvement in new order books. The latest increase in employment was the fastest since December 2015. Sub-contractor usage also increased at the fastest pace for over two-and-a-half years. Survey respondents noted that their own payrolls had been boosted by a larger than usual intake of trainees and apprentices in September. There were also some reports that tight labour market conditions had led to a strategic focus on long-term hiring policies.
Delivery times for construction products and materials continued to increase in September. Intense supply chain pressures were attributed to stock shortages at vendors and stretched transportation capacity.
September construction PMI data indicated a further decline in optimism about the year ahead. The degree of positive sentiment reported by survey respondents was the second-lowest since February 2013. Construction companies noted that political uncertainty and investor concerns about Brexit had dampened confidence in September.
Tim Moore, Associate Director at IHS Markit and author of the IHS Markit/CIPS Construction PMI: “UK construction firms experienced softer output growth during September, with house building, commercial and civil engineering all losing momentum. A lack of new work to replace completed projects meant that civil engineering saw an overall decline in activity for the second month running and remained the main laggard.
“There were mixed signals in terms of the near-term outlook. New order books strengthened to the greatest extent since December 2016, which indicates that construction workloads remain on an upward trajectory. Rising demand and tight labour market conditions led to robust job creation, with survey respondents commenting on a larger-than-usual uptake of apprentices in September.
“However, latest data showed that overall confidence about the year-ahead business outlook was among the lowest seen since the start of 2013. Construction companies continued to note that political uncertainty acted a key drag on decisionmaking, with Brexit worries encouraging a wait-and-see approach to spending among clients. The main areas reported as likely to see a boost in the coming year were construction work related to large-scale energy and transport projects.”