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Construction output drops for sixth month in a row, buyers report

5 November 2019 | By Neil Gerrard

Construction output fell for a sixth consecutive month according to the latest survey of buyers in the sector.

The IHS Markit/CIPS UK Construction Total Activity Index reported a score of 44.2 last month, where 50 indicates no change.

That was an increase on the 43.3 registered in September but still close to the 10-year low seen in June.

The survey also revealed a drop in new work, although the rate of contraction was the slowest for three months. Meanwhile, construction firms continued to reduce workforce numbers in October, which the survey said was linked to weak order books and concerns about the near-term business outlook.

In terms of output, civil engineering was the worst-performing area, with business activity down at the fastest pace since October 2009. House building also decreased at a faster rate in October. Commercial construction fell for the tenth month in a row but at the slowest rate since May, the survey said.

New orders fell for the seventh month in a row in October but the decline was the least marked since July.

Tim Moore, economics associate director at IHS Markit, which compiles the survey said: “UK construction companies experienced a downturn in business performance during October as political uncertainty and subdued economic conditions again combined to hold back sales. New orders have fallen in each month since April, which is the most prolonged period of decline recorded for more than six years.

"Civil engineering was the worst-performing area of activity in October, with business activity dropping at the fastest pace in ten years. Construction companies also voiced concerns about the uncertain outlook for large-scale infrastructure projects upon which growth is expected to rest in the coming years.

"House building has also lost momentum this autumn amid a broader slowdown in market conditions, with the latest survey data signalling the sharpest drop in residential work since June 2016.

"There are clear signs that construction firms are positioning for an extended soft patch for project starts, as highlighted by a further decline in purchasing volumes and another month of cuts to workforce numbers through the non-replacement of voluntary leavers."

Duncan Brock, group director at the Chartered Institute of Procurement & Supply added: "The construction sector’s distressing decline continued in October in spite of a small improvement in the headline index as a resolution to the political impasse seemed close. However with a fall in civil engineering not seen for a decade and the biggest drop in housebuilding since 2016, it appears that strength in the sector is seeping away.

"Jobs hiring suffered as businesses unsure of the government’s next steps held back on their development plans, which were weakened further by stronger competition for fewer opportunities. Future optimism remained at 2012 levels as the deep-seated Brexit gloom dampened down expectations.

"To say these figures are disappointing is a big understatement. Given that the next political hurdle is December’s General Election, all eyes will be on the new administration and clear direction, because at the moment there is little insight into what could possibly pull the sector out of its ditch."

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