Construction sector slows as commercial activity drops

posted by Francis Churchill
2 August 2017

July saw construction growth slow to its lowest in almost a year, CIPS data shows.

The rate of commercial construction work fell at its fastest pace for a year, leading to construction’s weakest performance since August 2016. House building also slowed and generally there was a reduction in the volume of new business.

The IHS Markit/CIPS UK Construction PMI fell to 51.9, down from 54.8 in June. A score above 50 indicates sector growth, while a score below signifies contraction.

Lower levels of commercial construction were the main driver for the slow down, with clients delaying decision making because of concerns about the economic and political outlook, buyers said.

Generally firms said there was a reluctance among clients to commit to new projects, which led to the first slow-down in new business since September, when the market started to pick up after Brexit.

Housing was the strongest performing category in the sector in July, but its growth was still the slowest for three months. Duncan Brock, director of customer relationships at CIPS, said this paralleled the “darker days of Brexit” when worries about the economy could be seen across the sector.

Prices for raw construction materials increased at their sharpest rate since the first half of 2011, with construction companies responding to this and lower sales by tightening their purchasing activities.

“Continuing price pressures from the weak pound lingered, driving cost inflation near to a six-year peak, stifling purchasing activity and jobs growth,” said Brock. “All in all, a challenging start to Q3 and there are possible roadblocks ahead for the sector in the rest of 2017, with longer lead times and suppliers struggling with stock levels, which adds insult to injury.”

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