October saw a marginal upturn in construction output, led by housing activity, according to the latest IHS Markit/CIPS UK Construction Purchasing Managers’ Index (PMI). Civil engineering and commercial building declined again and confidence regarding 12-month outlook dropped to its weakest level since December 2012. Caution in terms of the outlook for construction workloads meant that employment numbers increased at one of the slowest rates seen over the past four years.
At 50.8 in October, up from 48.1 in September, the seasonally adjusted PMI moved back above the 50.0 no-change mark. However, the latest reading was weaker than the post-crisis trend (54.7) and signalled only a marginal rise in overall construction output.
Tim Moore, Associate Director at IHS Markit and author of the PMI, said: “Greater house building was the sole bright spot in an otherwise difficult month for the construction sector. Sustained declines in civil engineering and commercial activity meant that large areas of the building industry have become stuck in a rut.
“Reduced tender opportunities and fragile demand are placing a dark cloud over the near-term outlook. October survey data indicated that UK construction companies are now the least confident about their forthcoming workloads since December 2012. Staff recruitment has also begun to tail off as construction companies head into the winter with heightened concern about demand conditions.
“The recent soft patch for civil engineering activity has been the most severe for around four-and-a-half years, linked to a shortfall of new contracts to replace completed work on infrastructure projects.
“Commercial building also fell in October, with survey respondents noting that concerns about near-term UK economic prospects had impacted on private investment and led to delayed spending decisions.
Duncan Brock, Director of Customer Relationships at the Chartered Institute of Procurement & Supply, said: “Though construction orders have shown a small improvement for the first time in four months, the sharp fall in business confidence will send a chill down the spine.
“With the lowest optimism since December 2012, purchasing managers blamed a slowdown in work from commercial clients, vanishing civil engineering projects and an increasing weariness over Brexit for the lack of performance, weak pipelines and slowdown in job hires.
“Supply chains were under the cosh again this month, as buyers struggled to get the materials and products they needed due to low stocks and squeezed supply, exacerbated by increased construction demand in the Eurozone. There were also reports of increasing shortages in some raw materials which slowed work already underway.
“Housing continued to show the strongest foundations and is set to be the main driver of growth in the coming months but the prospect of softer consumer demand and rising costs will impact. Any heavy reliance on residential building alone would be foolhardy with interest rate rises on the horizon and availability of skilled workers lacking in the sector, unless the Chancellor pulls a rabbit out of the hat and supports the training of new construction workers, the pound recovers some stability and a surge of supply capacity become available.”
