Growth lulls as commercial orders drop again

Aaron Morby 7 years ago
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Construction is sliding into a soft patch of growth as new orders for commercial work dropped for the second month in a row.

The fall in new work has weakened confidence for the whole construction sector despite rising growth in house building.

Concern about stagnating growth also hit employment levels across the industry, according to the latest Markit/CIPS UK Construction Purchasing Managers’ Index.

August survey data fell saw the index fall to 51.1 from 51.9 in July and 54.8 in June. An index rating of 50 represents no growth.

With many businesses now fearing continued falls in orders through the autumn employment growth slipped to its lowest levels for a year.

Tim Moore, Associate Director at IHS Markit and author of the IHS Markit/CIPS Construction PMI, said: “UK construction companies indicated that lacklustre growth conditions persisted during August.

“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.

“Survey respondents noted that subdued business investment and concerns about the UK economic outlook had led to a lack of new work to replace completed projects, especially in the commercial building sector.

“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.”

Cost pressures were the weakest since September 2016. Survey respondents noted that exchange rate depreciation continued to drive up prices for construction materials, but some commented on successful negotiations with suppliers against a backdrop of softer market conditions

Duncan Brock, Director of Customer Relationships at the Chartered Institute of Procurement & Supply, said: “The sector hit a roadblock this month as purchasing activity slowed for the third month and new business wins were hard to come by.

“Reduced Government spending, economic uncertainty and Brexit-delayed decision-making among clients were largely to blame.

“The struggling commercial sector drove this disappointment, languishing under the pressure with the fastest drop in activity in over a year.

“In the near-term future, without those new orders waiting in the wings, the performance of the construction sector is likely to continue to be downbeat.”

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