The latest IHS Markit/CIPS UK Construction Total Activity Index has shown that construction firms indicated a disappointing end to 2018 as business activity growth eased to a three-month low and new orders expanded at a relatively subdued pace. The main bright spot was a sustained rebound in civil engineering activity, which rose at the fastest pace since May 2017.
The slowdown in construction growth largely reflected softer rises in commercial and housing activity during December. Commercial building was the worst performing category, with activity expanding at the slowest rate since last May.
Anecdotal evidence suggested that subdued demand conditions were the main factor behind softer output growth in December. There were also some reports that unusually wet weather had acted as a brake on construction work.
At 52.8 in December, down from 53.4 in November, the headline seasonally adjusted IHS Markit/CIPS UK Construction Total Activity Index posted above the crucial 50.0 no-change value for the ninth consecutive month. However, the latest reading signalled only a modest rate of expansion that was the slowest seen since September.
A solid rise in employment numbers was recorded across the construction sector in December. However, the rate of job creation eased from November’s near three-year peak. Some firms noted that efforts to reduce costs had led to voluntary leavers not being replaced. Subcontractor usage meanwhile picked up, with the rate of expansion the strongest since December 2015.
Tim Moore, Economics Associate Director at IHS Markit, which compiles the survey, said: “UK construction firms signalled a slowdown in housing and commercial activity growth during December, which more than offset a strong performance for civil engineering at the end of 2018.
“Strong demand among first-time buyers meant that house building was the fastest growing category of construction output during 2018. However, construction companies indicated a renewed loss of momentum in December. Residential growth remains much softer than the two-and-a-half year peak achieved last summer.
“Levels of optimism remained subdued in relation to those recorded by the survey over much of the past six years, largely reflecting concerns that Brexit uncertainty will continue to encourage delays with decision-making, especially on commercial projects.”
Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply, said: “With a slight rise in new orders and a softening in overall activity growth, firms continued to be impacted by Brexit-related uncertainty and reluctance by clients to place orders especially for commercial projects.
“The saviours of the sector were residential building expanding for the 11th month in a row and civil engineering work rising at the fastest pace since May 2017, but additional underlying pressures were still in evidence. Continued price increases for raw materials remained a challenge, but suppliers at least were able to deliver their best performance since September 2016 in spite of extra demand as a result of stockpiling.”