Friday 4 September 2020 10:13 am

Construction sector growth slows as new work dries up

Growth in UK construction output slowed in August as subdued order books put the brakes on the sector’s coronavirus recovery.

The headline IHS Markit/CIPS UK Construction Total Activity Index registered 54.6 in August, down from 58.1 in July.

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It marks the third consecutive month of growth in construction output — indicated by any figure higher than 50 — but the latest expansion was the slowest in this period.

All three broad categories of construction provided a weaker contribution to the headline index in comparison to those seen in July.

Survey respondents mostly suggested that a lack of new work to replace completed contracts had slowed the speed of growth.

House building has enjoyed the strongest rebound since work was halted due to the coronavirus outbreak in late March.

The latest data showed this trend continued in August, with the Housing Activity Index posting a strong 60.7.

The equivalent figures for commercial work and civil engineering activity were considerably weaker at 52.5 and 46.6 respectively.

Total new business volumes increased in August for the third month running, but the rate of expansion slowed since July.

Construction companies noted economic uncertainty and a wait-and-see approach among clients had limited new work, while supply chain disruption continued to impact the industry.

Despite this, firms reported an improvement in their business expectations for the year ahead.

More than twice as many respondents said they expected a rise in construction output over the next 12 months as those that said they expected a fall.

This was largely driven by hopes of a boost to major infrastructure projects and resilient public sector spending.

But the optimism did not prevent a further drop in staff numbers, with job losses remaining among the highest levels recorded in the past decade.

“The latest PMI data signalled a setback for the UK construction sector as the speed of recovery lost momentum for the first time since the reopening phase began in May,” said Tim Moore, economics director at IHS Markit, which compiles the survey.

“The main reason for the slowdown in total construction output growth was a reduced degree of catch-up on delayed projects and subsequent shortages of new work to replace completed contracts in August.”

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Gareth Belsham, director of property consultancy and surveyors Naismiths, said the construction sector was “dancing a faltering foxtrot”.

“Two months of meteoric jumps in output were always going to be a hard act to follow, so few people will be surprised that overall momentum has eased back from the near five-year high seen in July,” he said.

“While the decline in new orders is a serious concern, this latest PMI data still paints a picture of an industry that has dusted itself off and got back to work with gusto.”