Construction output growth weakest for three years

Construction output growth has slowed to a three-year low, according to the latest survey of purchasing managers.

The Markit/CIPS Purchasing Managers’ Index score for April was 52.0, just above the critical 50.0 “no-change” threshold. However, the latest reading was down from 54.2 in March and pointed to the slowest expansion of construction business activity since mid-2013.

Commercial building was the strongest-performing broad category of activity in April, although the latest upturn was 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.

Tim Moore, senior economist at Markit and author of the index, said: “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.”

Markit/CIPS UK Construction PMI

Source: Markit/CIPS

Firms signalled a renewed decline in confidence about the year-ahead business outlook, resuming a general downward trend seen since June 2015.

Staffing levels continued to increase across the construction sector during April. Job creation has been recorded in each month since June 2013, which represents the longest period of sustained employment for around a decade. However, the latest increase in payroll numbers was only modest and some firms commented on more cautious hiring policies in response to softer demand patterns.

Moore said: “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. Softer growth forecasts for the UK economy appear to have provided reasons for clients to delay major spending decisions until the fog has lifted.

“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.”