UK construction output slows

By Joe Malone05 May 2016

UK construction saw a further loss of momentum in April, with business activity expanding at its slowest pace since June 2013, according to the latest report by the Markit/CIPS UK Construction PMI (Purchasing Managers’ Index).

Weak demand in the market contributed to one of the worst rises in employment numbers recorded over the past three years. Construction firms also indicated a smaller increase in input buying and noted a renewed fall in optimism regarding the year-ahead business outlook.

The Markit/CIPS UK Construction PMI – produced by financial information services provider Markit and the Chartered Institute of Procurement & Supply (CIPS) – is based on data compiled from monthly replies to questionnaires sent to purchasing executives in over 170 UK construction companies.

The seasonally-adjusted Markit/CIPS UK Construction PMI registered 52.0 in April, down from 54.2 in March. April did, however, register above the critical 50.0 no-change threshold, marking three years of sustained output growth across the construction centre.

Commercial building was the strongest performing category in April, although the latest upturn was also the slowest since July 2013. Residential construction growth rebounded only slightly from March’s 38-month low, while civil engineering activity expanded at the weakest pace so far in 2016.

The overall slowdown in construction output growth largely reflected weak new business volumes in April. Moreover, the latest survey signalled the weakest momentum for exactly three years.

Construction companies cited a number of factors weighing on client spending, including heightened uncertainty about the economic outlook, and a general unwillingness to commit to new projects.

Tim Moore, senior economist at Markit and author of the Markit/CIPS Construction PMI, said, “UK construction firms reported their worst month for almost three years in April, meaning that the first quarter slowdown is unlikely to prove temporary.

“Stalling new order volumes not only set the scene for further weakness ahead, but are already weighing on staff hiring and input buying across the construction sector.

He added that softer growth forecasts for the UK economy alongside uncertainty ahead of the EU referendum appeared to have provided reasons for clients to delay major spending decisions until the fog has lifted.

He said, “An additional factor dragging on construction sector performance is the lack of momentum in residential building. April’s survey highlighted one of the weakest rises in housing activity since early-2013, suggesting that greater caution in this sub-sector is adding to the sluggish growth conditions seen across the wider construction industry.”

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