UK construction growth hits 'roadblock'

Will Green is news editor of Supply Management
4 September 2017

Growth in the UK construction sector slumped in August as civil engineering projects stagnated and commercial work dived, according to the latest PMI.

Commercial work dropped at the fastest pace since July 2016, with firms reporting that concerns about the UK economic outlook had weighed on the sector and clients were delaying spending decisions or scaling back projects.

The IHS Markit/CIPS UK Construction Purchasing Managers’ Index slowed to 51.1 in August, down on 51.9 in July and against the no-change reading of 50.

A key reason was a lack of new orders to replace completed projects, said respondents. Residential building was the only area to buck the trend and record a rise in activity.

Supply chain pressures persisted in August, despite stagnation in input buying, with longer delivery times linked to ongoing stock shortages among vendors. On the other hand, cost pressures were the weakest since September 2016. Firms noted the weak pound was driving up prices for construction materials but some commented on successful negotiations with suppliers in softer market conditions.

Duncan Brock, director of customer relationships at CIPS, said: “The sector hit a roadblock this month as purchasing activity slowed for the third month and new business wins were hard to come by.

“Reduced government spending, economic uncertainty and Brexit-delayed decision-making among clients were largely to blame.”

He added: “Good fortune in prices is unlikely to continue as suppliers scrabbled to match the demand for an increasing number of materials in short supply and delivery times lengthened. Price rises will become inevitable if builders have to compete to get what they need.”

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