Construction purchasing managers have reported the first fall in new orders for 13 months.
The Markit/CIPS UK Construction Purchasing Managers’ Index (PMI) registered 48.1 in September, down from 51.1 in August and below the crucial 50.0 “no-change” threshold for the first time since July 2016.
Lower volumes of construction work reflected falls in commercial and civil engineering activity during September. The reduction in civil engineering work was the steepest for almost four-and-a-half years, while the latest decline in work on commercial development projects was the second-sharpest since February 2013, exceeded only by the post-EU referendum dip in July 2016.
Survey respondents commented on a headwind from political and economic uncertainty, alongside extended lead times for budget approvals among clients, according to Markit.
House building was the only broad area of construction activity to register an expansion in September. However, growth momentum eased to a six-month low amid reports citing worries about less favourable market conditions ahead.
IHS Markit/CIPS UK construction PMI
New business volumes dropped for the third month running in September, suggesting a continued shortage of work to replace completed construction projects. Aside from the downturn seen around the EU referendum last year, the current period of decline is the longest recorded since early 2013, said Markit.
More subdued demand led to another fall in use of subcontractors and a relatively weak rate of job creation among construction firms during September.
Tim Moore, associate director at Markit and author of the PMI, said: “A shortfall of new work to replace completed projects has started to weigh heavily on the UK construction sector. Aside from the soft patch linked to spending delays around the EU referendum, construction companies have now experienced their longest period of falling workloads since early-2013.
“Fragile client confidence and reduced tender opportunities meant that growth expectations across the UK construction sector are also among the weakest for four-and-a-half years. At the same time, cost pressures have intensified, driven by supply bottlenecks and rising prices for imported materials.
“Commercial development has been the worst-performing category in recent months. Construction firms attributed falling volumes of commercial work to subdued business investment and reduced risk appetite among clients, linked to heightened economic and political uncertainty.
“Civil engineering work decreased at its fastest pace since April 2013, which prompted concerns from survey respondents about a near-term lack of new infrastructure projects.
“House building slipped down a gear in September, which highlighted that fragile confidence has spread across all three key market segments. Some firms suggested that the loss of momentum for residential construction reflected worries about the outlook for ultra-low mortgage rates and less upbeat demand expectations.”
