Output in the UK's construction industry was lower than expected in June

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The UK's construction sector hit a 17-month high in May, but fell back in June (Source: Getty)

Construction became the second major UK industry to show disappointing output in June, with Markit's purchasing managers' index (PMI) falling to 54.8 during the month. 

That figure was down from 56 in May, a 17-month high. However, it fell just below analyst expectations of 55. Any figure below 50 denotes a contraction in the sector. 

The near-miss followed a disappointing performance by the manufacturing sector: figures published yesterday showed it undershot expectations by more than two points in June

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The figure for manufacturing suggested growth slowed in the housing, commercial and infrastructure sectors in June (although the rise in housing activity was still strong), with business activity, new work and employment all growing at slower rates in May.

Construction firms "commented on signs of renewed risk aversion among clients in response to heightened political and economic uncertainty," the report suggested, which pushed optimism among firms to its lowest since December. 

“Survey respondents commented on renewed caution among clients, "Fragile business sentiment led to delayed decision-making on large projects and greater concern about the outlook for workloads during the next 12 months," said Tim Moore, senior economist at IHS Markit.

"While construction firms remain upbeat overall about their near-term growth prospects, the degree of confidence fell to its lowest so far this year."

Mike Chappell, global corporates managing director for construction at Lloyds Bank Commercial Banking, added: “The headwinds prompted by the EU referendum a year ago continue to challenge the sector. Input price inflation is still an issue and there remain concerns about how the UK’s exit from the EU will affect construction firms, given their reliance on European labour.

“That said, the mood is not necessarily downbeat. Anecdotal feedback is that there is currently enough work to go round and opportunities abound for those contractors with exposure to areas with long-term committed investment, such as road and rail projects."

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