Data from the IHS Markit CIPS UK Construction Total Activity Index for February has revealed a slight fall in construction output, led by commercial and civil engineering work. Housing is the only category to register growth in February and supplier performance showed a sharp deterioration.
Tim Moore, Economics Associate Director at IHS Markit, which compiles the survey, said: “The UK construction sector moved into decline during February as Brexit anxiety intensified and clients opted to delay decision-making on building projects. Risk aversion in the commercial sub-category has exerted a downward influence on workloads throughout the year so far. This reflects softer business spending on fixed assets such as industrial units, offices and retail space. The fall in commercial work therefore hints at a further slide in domestic business investment during the first quarter, continuing the declines seen in 2018.”
UK construction companies indicated that business activity levels fell during February, which ended a ten-month period of sustained expansion. The drop in construction work was led by reductions in commercial building and civil engineering activity. A soft patch for new orders so far in 2019 meant that job creation remained subdued in February. Survey respondents often cited concerns about a lack of new projects to replace completed contracts.
At 49.5 in February, down from 50.6 in January, the headline seasonally adjusted Index registered below the 50.0 no-change threshold for the first time since the snow disruptions seen in March 2018. Aside from this brief weather-related decline in output, the latest reading was the lowest since September 2017.
Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply, said: “Commercial and civil engineering activity was pushed into the red, as client uncertainty over placing new orders left its mark. This meant the relatively weak residential building sector was the best performer. However, with consumer confidence also waning, housing is likely to follow suit in the coming months.
“The domino effect of stockpiling by other sectors such as manufacturing impacted on supplier performance, as builders competed for dwindling supplies of raw materials, while transportation availability also became a problem, leading to supply chain bottlenecks. This meant that purchasers were subjected to the second- longest delivery times since March 2015, affecting work already in-hand.
“On the upside, input price inflation was not as strong compared to the last couple of years and employment creation was modestly maintained in spite of some companies placing a freeze on any new hires. In short, the foundations of the construction sector are crumbling under the weight of Brexit and businesses are switching to survival mode until the way forward is cleared.”
