UK construction steadies but pessimism grows about the future

Britain’s construction activity consolidated in May but concerns grow about new orders falling and companies becoming more pessimistic about the outlook for growth.

The latest IHS Markit/CIPS UK Construction Purchasing Managers’ Index for May scored exactly the same figure as April of 52.5. Although the score represents a resurgence from those levels in March when firms were stifled by the Beast from the East, the drop in new orders has caused the highest level of concern and has led to forecasters predicting the possible same downward trend of the first quarter of 2018.

The May report highlights the continued uncertainty of Brexit and fragile business confidence as two of the main factors companies noted as main reasons for delays in building decisions. It’s the fourth time that new orders have declined in the space of five months.

Furthermore, job creation declined and companies reported a sharp rise in their costs, in part due to higher oil prices, according to the paper. Confidence in the outlook for growth fell to a seven-month low.

Sam Teague, economist at IHS Markit, said: “The May PMI data signalled an unchanged pace of activity growth across the UK’s construction sector since April’s somewhat underwhelming rebound, yet nevertheless indicating a recovery in the second quarter after the contraction seen at the start of the year. However, activity in May was once again buoyed by some firms still catching up from disruptions caused by the unusually poor weather conditions in March, and a renewed drop in new work hinted that the recovery could prove short-lived. With new order books deteriorating and cost pressures picking back up, it’s not surprising to see construction firms taking a dimmer view of prospects and pulling-back on hiring, all of which makes for a shaky-looking outlook.”

Commenting on the latest data, Mark Robinson, chief executive of Scape Group, said: “Although it is extremely positive to see that housebuilding activity remained buoyant in May as it continues to rebound from the heavy snow in March, it is disappointing to see overall construction new orders and outlook decline.  The industry is suffering from ongoing political uncertainty, despite the clear long-term requirement for infrastructure investment. The expanding UK population is placing considerable pressure on our public services, and a lack of proper upkeep and investment will put a strain on local economies, as evidenced by Northern Rail over the past week. Spend on improved connectivity will unlock huge growth potential for our regions and for the UK economy as a whole."