The UK's construction industry badly missed expectations in August


The decline in growth was driven by uncertainty, Markit said (Source: Getty)

There was more evidence the UK's construction industry had a disappointing summer this morning, after a closely-watched measure showed growth in activity fell in August.

Markit's purchasing managers' index (PMI) for the sector fell to 51.1 in August, down from 51.9 in July and way below the 52 analysts had expected. The figure was its lowest since August last year, but showed activity was still increasing: any figure above 50 indicates growth.

The figures indicated signs of a "sustained soft patch ahead", with new business volumes falling for the second month in a row, while uncertainty in the economy led to reduced business investment. Meanwhile, hiring fell to its slowest since July 2016 - the month after the Brexit vote. 

New order volumes also fell, for the second month in a row, although the rate of contraction was slower than in August. 

Read more: UK manufacturing hit a four-month high in August

“UK construction companies indicated that lacklustre growth conditions persisted during August," said Tim Moore, associate director at IHS Markit. 

"Civil engineering work stagnated, which meant that the construction sector was reliant upon greater house building activity to deliver an outright expansion in output volumes. Commercial development remained by far the worst performing category, with business activity falling at the fastest pace since July 2016.

“There were signs that UK construction firms are bracing for the soft patch to continue into this autumn, with fragile business confidence contributing to weaker trends for job creation and input buying during August.”

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, added that the construction sector is "flirting with another recession" after its output fell 1.3 per cent in the second quarter of the year.

"Although the PMI still is above the 50 mark that in theory separates expansion from contraction, it is below the 52 reading that has been the tipping point in practice. The further fall in the PMI echoes the deterioration of the E.C.’s measure of construction firms’ confidence to its lowest level since the aftermath of the Brexit vote.

"Admittedly, the decline in the PMI partly reflected a sharp fall in the civil engineering activity index to just 50.2 in August, from 54.0 in July. Public sector investment is set to rise by seven per cent this year, so this probably is just a blip.

"The housing activity index also picked up to 56.4, from 54.4, amid continued resilience in buyer demand for new homes due to the generous Help to Buy Scheme. But the construction sector’s slowdown has been led by a decline in the commercial work... which likely will worsen.

"If, as we expect, Brexit negotiations continue to progress slowly, more firms will activate Brexit contingency plans, freeing up office space and sapping demand for new commercial projects."

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