Construction industry hit by slowdown in new orders

A lack of new work to replace completed projects took its toll on the sector. Picture: Andrew O'Brien
A lack of new work to replace completed projects took its toll on the sector. Picture: Andrew O'Brien
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Britain’s construction sector cooled last month as political uncertainty continued to weigh on the economy.

While the closely watched Markit/Cips construction purchasing managers’ index (PMI) came in at 54.8 for June, above the 50 mark that separates contraction from expansion, it was down on May’s reading of 56 and slightly below what economists had been expecting.

A lack of new work to replace completed projects took its toll on the sector last month, with data suggesting that new order growth had eased to its weakest since March.

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Tim Moore, senior economist at IHS Markit, said: “Fragile business sentiment led to delayed decision-making on large projects and greater concern about the outlook for workloads during the next 12 months.

“While construction firms remain upbeat overall about their near-term growth prospects, the degree of confidence fell to its lowest so far this year.”

Construction companies were the least optimistic about their near-term growth prospects since December 2016, with the UK government’s faltering Brexit negotiations blamed for the despondency.

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Costs for builders have also increased substantially, Markit noted, with the slump in the Brexit-buffeted pound resulting in price hikes for imported construction materials. However, housebuilding activity was still at the second highest level since December 2015.

Mark Robinson, chief executive of Scape Group, said: “Clearly the industry is feeling the tremors from the shock formation of a minority government.

“Construction firms had hoped a general election would provide a government with a clear mandate to implement a fiscal strategy, however we are now faced with an immediate path ahead that is even rockier than before the vote.”

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Howard Archer, chief economic adviser to EY Item Club, added: “Weakened economy activity and appreciable economic and political uncertainties threaten to be a damaging combination for the construction sector over the coming months.

“Meanwhile, construction companies are being squeezed by elevated input costs.”

Activity in the UK’s manufacturing sector also came in shy of expectations as a slowdown in new orders sent output drifting to a three-month low, compounding the economic misery.

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