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Construction activity falls sharply in September

news

11th October 2017

Concerns about Brexit have led to commercial construction clients turning their backs on risk. This is evidenced by the most recent monthly survey of Construction Purchasing Managers which shows activity falling for the first time in 13 months in September.

The seasonally-adjusted Markit/CIPS UK Construction Purchasing Managers’ Index (PMI) was down in September to 48.1 from 51.1, falling below below the crucial 50.0 threshold that demonstrates no change.

The latest result is the sharpest downturn in overall construction output since July 2016, coming in a full point below expectations, and contributing to a relatively weak rate of job creation among construction firms last month.

Civil engineering activity is at its lowest for four and a half years - attributed to a lack of infrastructure projects replacing completed contracts. Despite this, house building activity registered some growth, although this momentum has eased to a six-month low.

Survey respondents largely blamed political and economic uncertainty for the downturn but delays to budget approvals were also cited as a reason for the drop in building activity.

New business volumes also dropped for a third consecutive month in September. Excluding an industry-wide wobble after the EU Referendum last year, the current decline is the most severe since 2013.

Associate director at IHS Markit and author of the construction PMI survey, Tim Moore, said: “Fragile client confidence and reduced tender opportunities meant that growth expectations across the UK construction sector are also among the weakest for four-and-a-half years. At the same time, cost pressures have intensified, driven by supply bottlenecks and rising prices for imported materials."

Director of customer relationships at the Chartered Institute of Procurement & Supply, Duncan Brock, said: “With the biggest contraction in overall activity since July 2016, and a drop in new orders, optimism was in short supply."

Construction makes up just 6% of Britain’s economy, but Markit's survey suggest that these disappointing trends are likely to continue during official third-quarter growth figures, just in time for the Bank of England to raise their interest rates.

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