Growth in construction activity almost ground to a halt in January

Emma Haslett
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British Construction Company Carillion Goes Into Compulsory Liquidation
Construction in the UK came close to contraction last month (Source: Getty)

Growth in activity in the construction sector almost ground to a halt in January, after a closely-watched index showed it had fallen to its lowest in four months.

IHS Markit's purchasing managers' index (PMI) for the construction industry fell to 50.2 in January - close to the 50 mark below which indicates a contraction in the sector. The figure was well below last month's 52.2, and below economists' expectations of 52.

Housebuilding, the industry's strongest sector, declined for the first time in 16 months, while the rate of job creation fell to an 18-month low.

Read more: UK construction output just fell by the most since 2012

“January’s PMI data indicated a difficult start to 2018 for the UK’s construction sector, underlined by business activity growth slumping to a four-month low and new orders sliding back into decline," said Sam Teague, an economist at IHS Markit.

“A contraction in housebuilding added to lacklustre commercial building and civil engineering markets, and reduced inflows of new work suggest overall activity could slip into decline in February. Furthermore, cost pressures remained intense, fuelled by shortages of input materials and high costs for imported products."

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, warned the figure is unlikely to improve over the next few months.

"Although the PMI remained slightly above the 50 mark that in theory should separate expansion from contraction, all readings below 52 have signalled declining output in practice.

"Housebuilding was the weakest sub-component; the housing activity index fell below 50 for the first time since August 2016. By contrast, the commercial and civil engineering balances both edged above 50. So the collapse of Carillion, which operates in the commercial and public sectors, can’t explain why the PMI fell in January."

Read more: Commercial projects weakness holds back construction sector

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