Construction output falls at steepest rate since April 2009

Construction output has fallen at the steepest rate since April 2009, according to the latest statistics from the IHS Markit/CIPS UK Construction Total Activity Index.

The new figures show that business activity declined for the second month running in June, the fall in house building was the largest reported for three years and new orders shrank amid political and economic uncertainty hitting client confidence.

June’s data revealed a sharp loss of momentum for the UK construction sector, with business activity and incoming new work both falling at the fastest pace for just over ten years. 

The headline seasonally adjusted index posted 43.1 in June, down sharply from 48.6 in May and below the 50.0 no-change mark for the fourth time in the past five months. Moreover, the latest reading signalled the steepest reduction in overall construction output since April 2009.

Commercial work fell for the sixth consecutive month and remained the worst performing area of construction activity, with the latest reduction in work on commercial building projects the steepest since December 2009.

Total new work received by UK construction companies decreased for the third consecutive month, with the rate of decline accelerated to its sharpest since April 2009. 

Tim Moore, associate director at IHS Markit, said: “The latest survey reveals weakness across the board for the UK construction sector, with house building, commercial work and civil engineering activity all falling sharply in June. While the scale of the downturn is in no way comparable that seen during the global financial crisis, the abrupt loss of momentum in 2019 has been the worst experienced across the sector for a decade. A continued lack of new work to replace completed projects illustrates the degree of urgency required from policymakers to help restore confidence and support the long-term health of the construction supply chain."

Duncan Brock, group director at the Chartered Institute of Procurement & Supply, said: “Purchasing activity and new orders dropped like a stone in June as the UK construction sector experienced its worst month for a decade. The pain of Brexit indecision was felt across all three sub-sectors but the previously resilient housing sector suffered the fastest drop in three years, which is frankly worrying news. We are still a long way off the level of entrenchment seen in the last economic crisis but, with the onslaught of indecision combined with a weakening global economy, this could easily turn into more months of contraction as future optimism remains subdued. A lack of clarity from policymakers has amplified the poor performance in June. Swift decision-making and a break in the political impasse hold the key to pulling the construction sector out of the quicksand."

Jonathan White, UK head of infrastructure, building and construction at KPMG, said: “June’s reading represents a further knock for the sector, particularly following May’s worrying blow, and is symptomatic of firms holding back on major spending, highlighting the underlying climate of indecision which isn’t likely to dissipate anytime soon.”

Ted Frith, COO at GLIL Infrastructure, said: “On the ground we see a lot of exciting infrastructure opportunities building in the pipeline and plenty of competition to deploy capital to support them. The trouble is that too many projects are being put on hold as the market waits to see how the coming months play out politically and in the economy. These figures suggest that it will take more time to instil some much-needed confidence into the market and get construction back on track.”