Construction Industry slows down

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The latest  IHS Markit/CIPS UK Construction Total Activity Index has revealed that commercial construction activity has fallen again. However, house building has helped UK construction sector return to growth in April with construction output rising for the first time since January.

IHS Markit/CIPS UK Construction Total Activity Index  April data pointed to a marginal expansion of UK construction output, driven by the fastest  rise in house building so far  in 2019. Commercial construction work and civil engineering activity continued to decline, but at slower rate than in March.

At 50.5 in April, up from 49.7 in March, the headline seasonally adjusted IHS Markit/CIPS UK Construction Total Activity Index posted above the neutral 50.0 threshold for the first time since January. The latest reading signalled a modest expansion of overall construction output, which contrasted with the declines seen in each of the previous two months.

The forward-looking survey indicators nonetheless remained subdued in April,with new orders falling for the first time since May 2018 and business optimism easing to its lowest since last October. Concerns about the demand outlook resulted in more cautious staff hiring strategies in April, as highlighted by the first fall in work force numbers since July 2016.

Tim Moore, Associate Director at IHS Markit, which compiles the survey:“A return to growth would normally be considered a positive month for the UK construction sector, but the weakness outside of house building gives more than a little pause for thought. Commercial activity and civil engineering both remained on a downward path in April as political uncertainty led to delays with spending decisions.

“On the supply side, sub-contractor availability worsened and construction firms continued to report low stocks among suppliers in April. Latest data revealed the greatest lengthening of lead times for construction inputs since February 2015, reflecting ongoing capacity pressures across the supply chain.

“The forward-looking survey indicators remain subdued, with the UK construction sector recording a drop in business optimism during April and the largest fall in new work for over one year. A lack of new work has started to impact on staff recruitment, as signalled by a reduction in payroll numbers for the first time since July 2016. This provides another signal that construction firms are bracing for an extended period of soft demand ahead.”

Blane Perrotton, managing director of the national property consultancy and surveyors Naismiths, said: “While this slight uptick appears tantalisingly close to being a cause for celebration for the UK construction sector, nothing could be further from the truth.

“With no tangible end in sight to the farce that is the UK’s effort to leave the Bloc, commercial developers are understandably more inclined to continue sitting on their hands rather than commit to larger projects that carry more risk.

“Falling employment numbers also contribute to a bleak forecast, as EU citizens – who make up swathes of Britain’s construction workforces – leave the UK for their home countries.

“Unless Britain can find the manpower needed to plug the emerging gap in the labour market, the construction industry could be in for a challenging few years.