The UK construction sector moved towards a more severe downturn in September, as buyers reported a further decline in activity on August.
The latest IHS Markit/CIPS UK Construction Total Activity Index posted a score of 43.3 in September (where 50.0 indicates no change in activity), a further decline on the 45.0 recorded in August.
The survey of purchasing managers pointed to the second-fastest rate of decline in building activity since April 2009, outpaced only by the decline in June this year.
It also recorded a “historically deep” drop in new orders, while firms trimmed employment at the fastest rate since the end of 2010 due to unfavourable demand.
Source: IHS Markit/CIPS UK Construction Total Activity Index
The decline in activity applied to all three categories of construction work – commercial, civils and housing – but it was the commercial sector that was the worst performing. The rate of decline in civil engineering was the fastest in close to a decade.
Buyers blamed the slowdown on Brexit uncertainty and the resultant hesitancy among clients, as well as underlying weakness in demand.
UK construction firms also slowed down their purchasing activities, with buying levels declining at the joint-fastest rate since January 2010.
But companies were “mildly optimistic” that output would pick up over the coming 12 months, although business confidence was weak by historical standards.
Client hesitancy
Joe Hayes, economist at IHS Markit, which compiles the survey, said: “The UK construction sector remained mired in a downturn at the end of the third quarter, according to the latest PMI data. Activity is being pulled down at its second-fastest clip for over a decade as firms are buffeted by client hesitancy, heightened Brexit uncertainty and a weak outlook for the UK economy. The commercial sector was a notable casualty in September, with building activity here falling at the fastest rate since April 2009, highlighting the damaging effects of project delays and belt-tightening.
"Low confidence has subsequently caused construction order books to fall substantially. Panellists reported another sharp drop in demand in September that was one of the strongest in the post-crisis era. Forward-looking indicators suggest that businesses are bracing themselves for a protracted construction slump, with input purchasing and employment both falling at rates unsurpassed since 2010.”
Duncan Brock, group director at the Chartered Institute of Procurement & Supply said: "The construction sector offered another devastating result in September with the second fastest fall in new orders since March 2009 and the financial crisis. After a relentless six-month decline in order books driven by Brexit uncertainty and political indecision, this is hardly surprising.
"Residential building continued to be hit hard with a fourth successive month of deterioration but the commercial sector took the biggest brunt of this downturn spiral as clients turned their back on spending and committing to larger projects. This in turn had significant knock-on effects on construction employment with the biggest fall in staffing levels since December 2010. Such disappointing news as the sector is still recovering from a lack of skills and capacity created by the last recession.
"Looking ahead the signs do not look positive. Even a moderation in input prices since March 2019 and some moderate improvement in supply chain pressures will not be enough to keep the wolf from the door as no-deal looms and businesses remain Brexit unsteady."
