'Clouds of uncertainty' depress UK construction sector

4 May 2016

UK construction output growth has slowed to its weakest for almost three years amid stalling new business volumes in April, according to the latest Markit/CIPS UK Construction Purchasing Managers’ Index.

New order volumes are stagnating and overall business activity is expanding at its slowest pace since June 2013, the index found.

Subdued demand conditions contributed to one of the weakest rises in employment numbers recorded over the past three years slowing input buying and lowering optimism regarding the year-ahead business outlook.

The seasonally index registered 52.0 in April – above the critical 50.0 threshold which indicates no change. This marked three years of sustained output growth across the construction sector.

However, growth was down from 54.2 in March and signalled the slowest expansion of business activity since mid-2013.

Commercial building was the strongest performing broad category of activity in April, though even this showed the slowest upturn seen since July 2013.

Residential construction growth rebounded marginally from March’s 38-month low, while civil engineering activity expanded at the weakest pace so far in 2016.

Staffing levels continued a modest increase in the construction sector during April although some firms said hiring was more cautious in response to softer demand and sub-contractor usage rose for the first time in three months during April.

Supply chain pressures eased as vendor delivery times remained stable and some firms noted softer demand for raw materials. Data pointed to the weakest increase in input buying for almost three years.

David Noble, group CEO, CIPS, described “clouds of uncertainty” depressing the construction industry’s outlook.

“Fears over weaker UK and global economic growth dealt a blow to confidence in the construction sector, leading to delays in new spending commitments,” he said.

“The prospect of the EU referendum and its outcome in June are likely to add to uncertainty too, with many construction firms preferring to wait and see what happens before making any decisions.

“Construction companies adopted a more cautious approach to purchasing and hiring, leading to a rise in sub-contractor usage to tide them over until the outlook becomes clearer.”

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