The Markit/Chartered Institute of Purchasing & Supply (Cips) UK construction purchasing managers’ index (PMI) showed a reading of 51.1 for August – down from 51.9 in July and barely above the 50 no-change mark.
The report blamed stagnant civil engineering work and the biggest fall in commercial building work since July last year, with new orders drying up.
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Cips director Duncan Brock said: “The sector hit a roadblock 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.”
Dr Howard Archer, chief economic adviser at the EY Item Club, said it was “a poor survey that suggests the construction sector will be of little, if any, help to UK GDP growth in the third quarter”.
Archer said that activity had been “clearly hampered” by heightened economic and political uncertainty fuelling client caution, and that August’s further contraction in new orders “bodes ill for construction activity in the near term at least”.
He added: “Furthermore, despite the improvement in housebuilding activity in August, there is the very real possibility that housebuilding activity could be pressurised by extended lacklustre housing market activity and subdued prices amid weakened consumer fundamentals.”
In currency markets, sterling edged down against the US dollar to $1.294, and was 0.5 per cent lower versus the euro at 1.086 as the disappointing data was seen as adding to the case for the Bank of England to hold its hand on any interest rate rise.
Tim Moore, associate director at IHS Markit, said: “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.”
Yesterday’s data surprised City economists as it came after news last Friday that manufacturers did better in August, with output at UK factories pushed to a four-month high in an encouraging sign for the overall economy following a lacklustre start to the year.
Construction is the third main leg of the UK economy behind services and manufacturing. It is about 7 per cent of UK GDP – more than utilities, mining, fishing and agriculture combined.