UK construction hit by 'autumnal gloom'

Will Green is news editor of Supply Management
3 October 2017

The UK construction sector slipped into contraction in September as fragile confidence prevailed, according to the latest PMI.

Commercial and civil engineering projects slumped as firms reported headwinds from political and economic uncertainty and extended lead times for budget approvals among clients.

The IHS Markit/CIPS UK Construction Purchasing Managers’ Index fell to 48.1 in September, down on 51.1 in August, and below the neutral 50 mark, signalling negative growth. It was the fastest decline in overall construction output since the Brexit referendum last year.

Duncan Brock, director of customer relationships at CIPS, said: “A dismal picture of construction emerged this month as the sector showed signs of worsening business conditions across the board.

“With the biggest contraction in overall activity since July 2016, and a drop in new orders, optimism was in short supply.”

The drop in engineering work was the steepest in almost four-and-a-half years, while the decline in commercial work was the second-sharpest since February 2013, exceeded only by the post-referendum dip.

Only housing registered an expansion, though growth was at a six-month low.

Input buying decreased for the first time in six months, largely in response to reduced workloads, but firms continued to face rising input costs as higher prices for imported materials pushed inflation to a seven-month high.

Brock said: “The contagion continued all along the supply chain as material shortages placed a strain on delivery times and increased commodity prices were affected by the weak pound. Despite a marginal increase in employment figures, this wasn’t enough to dispel the descending autumnal gloom where it is unclear where any major shift in momentum for the sector will come in the next few months.”

Tim Moore, associate director at IHS Markit, said: “Some firms suggested the loss of momentum for residential construction reflected worries about the outlook for ultra-low mortgage rates and less upbeat demand expectations.”

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