Construction hits 'bump in the road'

Will Green is news editor of Supply Management
4 September 2020

Growth in the UK construction sector slowed in August following a near five-year high in July, according to the latest PMI.

While house building continued to expand in August, commercial work and civil engineering activity were notably weaker.

The IHS Markit/CIPS UK Construction Purchasing Managers’ Index slipped to 54.6 in August, down on 58.1 in July and against the no-change reading of 50.

Companies noted economic uncertainty and a wait-and-see approach among clients had reduced new work.

Supply chain disruption persisted across the sector, leading to another sharp drop in vendor performance. Stock shortages and imbalanced supply and demand contributed to higher purchasing costs. The rate of input price inflation was the highest since April 2019.

Two-fifths (43%) of survey respondents expected a rise in output over the next 12 months, compared to 19% anticipating a fall.

However, the rate of job shedding eased only slightly on July and remained among the fastest seen over the past decade.

Duncan Brock, group director at CIPS, said: “The momentum in the sector’s recovery hit a bump in the road in August with a sudden slowdown in output growth and tender opportunities, while employment trends remained the most fragile in a decade.

“This stalled progress was not a surprise given the warning signs last month that any hard-won progress could start to fizzle out.”

Tim Moore, economics director at IHS Markit, said: “The main reason for the slowdown in total construction output growth was a reduced degree of catch-up on delayed projects and subsequent shortages of new work to replace completed contracts in August.”

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