UK Construction Sector Losing Momentum

Burflex House, Clay Street, Hull, East Yorkshire, HU8 8HA E.

Burflex House, Clay Street, Hull, East Yorkshire, HU8 8HA E.

UK Construction Sector Losing Momentum

UK Construction Sector Losing Momentum

The latest figures from the IHS Markit/Chartered Institute of Procurement and Supply (CIPS) UK Construction Purchasing Managers’ Index (PMI) have indicated that the construction sector in the country is slowing down.

Activity fell from a rating of 52.8 in December to 50.6 in January, only just keeping it in positive territory. Although there was still expansion within the sector, the organisations noted that this is the slowest rate it’s recorded since March 2018, when heavy snow stalled construction projects across the country.

Among those surveyed, Brexit was cited as a contributing factor, with many clients hesitant about starting a building project with so much uncertainty relating to the country’s departure from the EU.

Residential construction remains the most robust sector within the industry, while civil engineering also experienced a marginal increase in work. Commercial construction was named as the weakest performer, however.

This area of work recorded its first decline in 10 months, with Brexit cited as a particularly crucial factor in the slowdown of projects in this area.

Despite the slower start to 2019, 41 per cent of those in the construction industry are still expecting output to rise rather than fall this year, with just 16 per cent of those questioned stating that they expect activity to drop.

Tim Moore, economics associate director at IHS Markit, commented: “Delays to client decision making on new projects in response to Brexit uncertainty was cited as a key source of anxiety at the start of 2019.”

He added that total new business growth hit its lowest level since last May, largely due to “difficulties converting opportunities to sales”.

Meanwhile, Brian Berry, chief executive of the Federation of Master Builders (FMB), said that given the current political climate in the UK it shouldn’t come as a surprise that the sector has experienced a slowdown.

However, he stressed that it isn’t only political uncertainty that is affecting house building in the UK, but also rising materials costs and a difficulty in finding sufficient skilled workers.

“Material prices have been rising steadily since the depreciation of sterling following the EU referendum,” he explained.

Mr Berry added: “What’s more the construction skills crisis means that key trades are extremely difficult to recruit and the upshot of this is rising wages in construction.” As a result of these factors, house builders are seeing their margins get squeezed, he elaborated.

However, Duncan Brock, group director at the CIPS, said that hiring activity in the construction sector had suffered, with employment in the industry climbing at its slowest rate since July 2016. He had a stark warning about the fortunes of the construction industry.

“With optimism also in short supply, the sector only needs a small nudge to tip it closer to recession,” he stated.

No doubt those working in all sectors of the construction industry will be closely watching developments surrounding Brexit and hoping for a positive outcome to help the industry return to more robust growth.

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