Buyers report sharpest drop in new work for 10 years

3 September 2019 | By Neil Gerrard

Construction buyers reported the sharpest drop in new work for a decade in August.

That’s according to the latest figures from the IHS Markit/CIPS UK Construction Total Activity Index, which registered 45.0 in August (where 50.0 represents no change), indicating a decline in businesses activity for the fourth month in a row.

Construction firms indicated that their business expectations for the year have weakened sharply since July and were the least upbeat since December 2008.

All three categories of construction work declined in August, led by commercial building. Civil engineering activity also fell at a “relatively sharp pace”, while house building fell only slightly.

Source: IHS Markit/CIPS UK Construction Total Activity Index

New orders have fallen in each month since April, according to the survey, while latest data signalled a “sharp decline” in new work, with the rate of contraction the fastest since March 2009.

Nonetheless, employment trends remained resilient during August, with only a marginal drop in staffing levels.

Tim Moore, economics associate director at IHS Markit, said: “Domestic political uncertainty continued to hold back the UK construction sector in August, with survey respondents indicating that delays to spending decisions had contributed to the sharpest fall new work for over 10 years.

"Construction companies noted that rising risk aversion and tighter budget setting by clients in response to Brexit uncertainty had held back activity, particularly in the commercial sub-sector. Commercial construction activity fell at a steep and accelerated pace during August, which more than offset the softer rates of decline in house building and civil engineering work.

"Concerns about softening demand for new projects resulted in a fall in business optimism across the construction sector to its weakest since December 2008. This provides an early signal that UK construction companies are braced for a protracted slowdown as a lack of new work to replace completed contracts begins to bite over the next 12 months."

Duncan Brock, group director at the Chartered Institute of Procurement & Supply added: "The reality is, if a revival of confidence and a flood of new orders return to the construction sector in the coming weeks, much like a large tanker turning in a dock, there is little room for the sector to improve in the last quarter of the year. It’s likely September’s data will be even more discouraging."

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