Construction sector slips into contraction

Will Green is news editor of Supply Management
4 March 2019

The UK construction sector slipped into contraction in February as commercial and civil engineering activity dropped.

The IHS Markit/CIPS UK Construction Purchasing Managers’ Index fell to 49.5 in February, down on 50.6 in January and against the neutral reading of 50.

Barring the brief decline caused by snow disruption in March 2018, it marked the lowest reading since September 2017.

Residential work was the best performing area but the rate of expansion was modest and not enough to offset declines in the commercial and civil engineering categories.

Yet again there were reports that Brexit and a general drop in confidence had subdued demand.

Input buying fell for the first time since September 2017 but suppliers’ delivery times lengthened to the greatest extent since August 2018. Firms noted that stockpiling by manufacturers had led to transport shortages and longer waiting times for construction products and materials. Input cost inflation edged upwards but was still the second-lowest level since June 2016.

Duncan Brock, group director at CIPS, said: “Input price inflation was not as strong compared to the last couple of years and employment creation was modestly maintained in spite of some companies placing a freeze on any new hires.”

But he added: “In short, the foundations of the construction sector are crumbling under the weight of Brexit and businesses are switching to survival mode until the way forward is cleared.”

Tim Moore, economics associate director at IHS Markit, said: “Risk aversion in the commercial sub-category has exerted a downward influence on workloads throughout the year so far. This reflects softer business spending on fixed assets such as industrial units, offices and retail space.

“The fall in commercial work therefore hints at a further slide in domestic business investment during the first quarter, continuing the declines seen in 2018.”

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