Construction sector slows as General Election draws near

Will Green is news editor of Supply Management
5 May 2015

Growth in the UK construction sector has slowed to an almost two-year low against a background of uncertainty caused by the General Election, according to a survey of buyers.

The Markit/CIPS UK Construction Purchasing Managers’ Index slowed to 54.2 in April, compared to 57.8 in March and against a no-change position of 50.

However, the data showed the worst phase of the downturn in supplier performance may have passed, as the lengthening of lead times was the least marked since June 2013 and input cost inflation eased to its lowest in more than two years. A number of firms reported increased stocks at suppliers that had helped alleviate strain on materials availability and vendor capacity.

Job creation remained robust in April and there were widespread reports of worsening capacity pressures in the labour market, contributing to a further drop in subcontractor availability and an increase in their charges, which rose at the fastest rate since the survey began in 1997.

Residential housing was the best performing area while growth in the commercial sector was the slowest since August 2013 and civil engineering activity decreased for the first time in four months.

Business confidence concerning the next 12 months dipped from the nine-year high seen in March but remained stronger than the long-run average, with firms suggesting the removal of election-related uncertainty would help support new business gains.

David Noble, group CEO, CIPS, said: “With this slack in new pipeline orders, suppliers were able to improve their performance as well as increase levels of stock to lighten any log jam in the supply of raw materials.

“Though new business growth in the sector has slowed for eight months out of the past 10, business optimism is only slightly bruised and remains more solid than the average over the life of the index.”

Tim Moore, senior economist at Markit, said: “The uncertain general election outcome appears to have put some grit in the wheels of decision making. Construction firms widely noted delays with clients’ budget setting and a reduced propensity to commit to new projects.

“Taken as a whole, the latest survey presents a far more upbeat picture than the curiously weak official construction output data for the first quarter of 2015."

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