July data reveals a growth slowdown in the UK construction sector

The PMI Construction released today by the Chartered Institute of Procurement and Supply and Market Economics shows that the pace of expansion in the construction industry slowed significantly in July.

The construction sector purchasing managers’ index (PMI) slumped from a reading of 54.8 in June to only 51.9, according to IHS Markit.

UK construction companies recorded another growth slowdown in July, reflecting lower volumes of commercial building and a softer expansion of housing activity. The latest survey also revealed a reduction in new business volumes for the first time since August 2016, which acted as a headwind to job creation and input buying across the construction sector.

Tim Moore, Associate Director at IHS Markit and author of the IHS Markit/CIPS Construction PMI, said:

“July data reveals a growth slowdown in the UK construction sector, mainly driven by lower volumes of commercial development and a loss of momentum for house building. Weaker contributions from the cyclically sensitive areas of construction activity more than offset resilience in the civil engineering sector.

“Worries about the economic outlook and heightened political uncertainty were key factors contributing to subdued demand. Construction firms reported that clients were more reluctant to spend and had opted to take longer in committing to new projects.

“There was a knock-on impact for job creation and input buying following the largest downturn in order books since August 2016. However, supply chain pressures remained intense, reflecting low stocks among vendors, and materials prices continued to rise at one of the fastest rates seen for six years.

“The combination of weaker order books and sharply rising construction costs gives concern that an extended soft patch for the construction sector may be on the horizon.”

Duncan Brock, Director of Customer Relationships at the Chartered Institute of Procurement & Supply, said:

“The number of new orders dropped significantly this month and at the fastest rate since August 2016, as commitment-averse clients contributed to the sector’s weak trajectory.

“Commercial building activity slowed for the first time in five months and was the main drag on the Index. Housing, the shining light of the sector eased marginally, but produced the slowest growth since April, as parallels with the darker days of Brexit, worries about the UK economy and post-election uncertainty can be seen across the construction sector.

“Continuing price pressures from the weak pound lingered, driving cost inflation near to a six-year peak, stifling purchasing activity and jobs growth. All in all, a challenging start to Q3 and there are possible roadblocks ahead for the sector in the rest of 2017, with longer lead times and suppliers struggling with stock levels, which adds insult to injury.”

Read the the IHS Markit/CIPS UK Construction Purchasing Managers’ Index news release 2nd August 2017 in full click here.

Allen Walkey

Highly experienced businessman with a successful career in property sales and investment both in the UK and abroad. Now a freelance writer and blogger for the property and Investment Industry, keeping readers up-to-date with changes and events in a rapidly changing world.

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