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Construction growth slows as Brexit delays building projects

Output in Britain’s construction sector grew at the slowest pace for three months in December as Brexit worries continue to hold the industry back.

The Markit/CIPS UK Construction purchasing managers’ index (PMI) fell to 52.8 in December, down from 53.4 the previous month.

A reading above 50 indicates growth but economists had been expecting a reading of 52.9.

December’s modest rate of expansion was the slowest seen since September 2018.

Tim Moore, of 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.

“Subdued domestic economic conditions and an intense headwind from political uncertainty resulted in the weakest upturn in commercial work for seven months.”

Commercial building was the worst performing category, while work on civil engineering projects was the strongest area of construction activity.

Construction companies cited “heightened political uncertainty” resulting in delays to spending decisions among clients, especially in relation to commercial development projects.

Duncan Brock, group director at the Chartered Institute of Procurement and Supply, added: “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.”

However, business confidence was the highest since last April and well above the near six-year low seen in October.

Survey respondents were buoyed by a boost to growth from work on big-ticket transport and energy infrastructure projects in 2019.

Source: BT

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UK construction growth at weakest level for six months

Britain’s construction sector suffered its weakest growth for six months in September as the “Brexit blot on the landscape” held back activity, according to a report.

The closely-watched Markit/CIPS UK Construction purchasing managers’ index (PMI) showed a weaker-than-expected reading of 52.1 in September down from 52.9 in August, with house building losing momentum.

A reading above 50 indicates growth, but economists had expected the reading to remain at 52.9 according to consensus figures from Pantheon Macroeconomics.

The weakest overall activity in six months shows that caution and Brexit concern remain roadblocks to strong growth.

Duncan Brock, CIPS

The report said the September data indicated the sector continues to be in a “downbeat mood”, with business optimism at its second lowest level since the beginning of 2013.

This comes despite the figures showing the biggest rise in new orders since December 2016.

“The Brexit blot on the landscape was still in evidence as housing activity slowed to a pre-April growth rate and clients hesitated to place orders,” said Duncan Brock, group director at the Chartered Institute of Procurement & Supply (CIPS).

Civil engineering was the worst-performing sector, as activity declined at a faster rate.

A lack of new work to replace completed projects was blamed, after a summer uplift caused in large part by work delayed earlier in the year.

Mr Brock added: “This tale of feast and famine offers little in the way of reassurance and is more about holding on to stable growth than a sprint to the finish.

“The weakest overall activity in six months shows that caution and Brexit concern remain roadblocks to strong growth.”

The slower growth in house building comes as Nationwide Building Society also released data on Tuesday showing property prices edged up just 0.3% month-on-month in September.

Howard Archer, chief economic adviser at EY ITEM Club, said the weaker housing market could continue to act as a drag on construction.

“There is the risk that house building activity could be pressurised by extended lacklustre housing market activity and subdued prices amid challenging fundamentals,” he said.

The PMI survey of firms showed that optimism for the year ahead declined in September.

Construction companies cited political and investor concerns about Brexit as a factor in lower confidence.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said this was supported by official data which has indicated a decline in new orders and housing starts in the second quarter.

“Accordingly, we doubt that the construction sector will make a positive contribution to GDP (gross domestic product) growth over the next few quarters,” he said.

Source: BT.com