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Tough summer ahead for construction?

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18th June 2018

As we enter summer, the construction industry in the UK is fragile according to information obtained within the latest survey of purchasing managers.

The construction purchasing managers index (PMI) data for May 2018 indicated only a slight improvement on construction activity in the UK. While commercial activity growth was at a three-month high, there was a much softer expansion in residential and civil engineering.

New order books contracted for the fourth time in five months, which contradicts data which was gathered by the Builders Conference - who found that new orders in the construction industry were running smoothly and consistently above £4bn every month of 2018 so far.

There was only a modest increase in total activity in May, as the seasonally adjusted IHS Markit/CIPS UK was the same as April.

The strongest of the three monitored sub-sectors was residential work, for the third month running. However, the pace of expansion has eased from April’s 11-month high.

Commercial and civil engineering sectors are safe in growthy territory for the second month in a row. The only category to record a faster rate of expansion than in April, was civil engineering.

However, the survey found that new order books began to fall during May. The weaker demand for project was blamed on political and economic uncertainty, as well as a subdued rail sector condition and fragile business confidence. Optimism towards future growth has declined to a seven-month low.

Job creation also fell to a four-month low, and surveyed companies commonly reported a shortage of skilled staff.

Sam Teague, economist at IHS Markit said: “The May PMI data signalled an unchanged pace of activity growth across the UK’s construction sector since April’s underwhelming rebound, yet nevertheless indicating a recovery in the second quarter after the contraction seen at the start of the year.

“However, activity in May was once again buoyed by some firms still catching up from disruptions caused by the unusually poor weather conditions in March.

“Inflows of new business slipped back into decline, signalling the resumption of the downward trend in demand seen during the opening quarter.

Companies frequently noted Brexit uncertainty and fragile business confidence led clients to delay building decisions in May.

“With new order books deteriorating and cost pressures picking up, it’s not surprising to see construction firms taking a dimmer view of prospects and pulling-back on hiring, all of which makes for a shaky outlook.”

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