Worrying data for UK’s construction sector

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Output in Britain’s construction sector recorded its first back-to-back contraction since 2016 in March as Brexit anxiety continues to weigh on firms as they delay building projects.

The Markit/CIPS UK Construction purchasing managers’ index (PMI) showed a reading of 49.7 for March, up from 49.5 in February.

But a number below 50 indicates contraction and last month’s figure came in below expectations of 49.8.

It was also the first back-to-back contraction since August 2016, reflecting “subdued underlying demand” and delays to decision-making among clients.

Joe Hayes, economist at IHS Markit, which compiles the survey, said: “Fears that the recent weakness of the UK construction sector may not be just a blip, but a sustained soft patch, were further fuelled by latest data.

“Brexit-related uncertainty continued to generate indecisiveness, ultimately hitting order book volumes.

“Furthermore, strong competition for contracts was also reported by some panel members.

“The outlook was subsequently underwhelming by historical standards, with the unsettled political and economic environment keeping business confidence below its long-run average.”

Commercial construction was the worst performing segment during the month, with business activity dropping to the greatest extent for a year.

Survey respondents pointed to concerns about the domestic economic outlook, which is leading to “risk aversion” among clients.

Residential building held up, but the cost of goods increased, which was put down to the Brexit hit pound and a shortage of products as stockpiling gathers pace.

“UK construction businesses ramped up their purchases of materials and other inputs, reflecting efforts to build safety stocks ahead of any potential Brexit-related disruptions.

“As such, supply chain constraints persisted and average input lead times lengthened once again,” Mr Hayes added.

The figures follow worrying data from the manufacturing sector on Monday, which showed that Brexit stockpiling helped fuel a surge output last month as firms sought to avoid being caught short.

The prospect of a no-deal chaotic exit from the EU is still a very real possibility as MPs squabble over which form of Brexit to pursue.