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Construction output down for August

Reduced commercial work a key source for slowdown

The August survey data compiled by Markit/CIPS has indicated that the UK construction sector continued to experience a slowdown this summer. Reduced levels of commercial work were a key source of weakness, which offset strong growth in residential building.

Residential building was the only area to buck the overall trend in August, with housing activity rising at a robust and accelerated pace since the previous month. Meanwhile, civil engineering activity was close to stagnation and commercial work dropped at the fastest pace since July 2016.

Tim Moore, associate director at IHS Markit and author of the IHS Markit/CIPS Construction PMI said: “UK construction companies indicated that lacklustre growth conditions persisted during August. Civil engineering work stagnated, which meant that the construction sector was reliant upon greater house building activity to deliver an outright expansion in output volumes. Commercial development remained by far the worst performing category, with business activity falling at the fastest pace since July 2016.

“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.”

Duncan Brock, director of customer relationships at the Chartered Institute of Procurement & Supply, said: “The sector hit a roadblock this month 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.

“The struggling commercial sector drove this disappointment, languishing under the pressure with the fastest drop in activity in over a year. Job creation was nothing to shout about and showed signs of a slowdown, as companies reined back additional spending.

“But any further drag on the construction sector overall was halted by the continuing strong performance by house builders, defying expectations with a good month. The sector was also offered some respite from the ongoing march of rising prices as input price inflation weakened.

“This good fortune in prices is unlikely to continue as suppliers scrabble to match the demand for an increasing number of materials in short supply and delivery times lengthened. Price rises will become inevitable if builders have to compete to get what they need.

“In the near-term future, without those new orders waiting in the wings, the performance of the construction sector is likely to continue to be downbeat.”