UK construction market suffers sharpest decline since March 2018

Business leaders across the UK construction industry have blamed a combination of political uncertainty and Brexit for the gloomy figures in the latest IHS Market / CIPS UK Construction Total Activity Index report.

The report stressed that business optimism amongst the construction industry is its weakest since October 2018, with survey respondents also widely citing concerns that domestic political and economic uncertainty would dampen business activity growth over the next 12 months.

The reports key findings include:

  • Another fall in construction output in May means the sharpest decline since the snow-related downturn in March 2018.
  • Commercial work remains the weakest performing category, with output falling to the greatest extent since September 2017.
  • The sharpest decline in workforce numbers since November 2012.

Tim Moore, associate director at IHS Markit, said: “May’s data reveals another setback for the UK construction sector, as output and new orders both declined to the greatest extent since the first quarter of 2018. Survey respondents attributed lower workloads to ongoing political and economic uncertainty, which has led to widespread delays with spending decisions and encouraged risk aversion among clients.”

Duncan Brock, group director at the Chartered Institute of Procurement and Supply, said: “With the continuing uncertainty around Brexit and instabilities in the UK economy, client indecision affected new orders and particularly affected commercial activity. Policymakers will need to pull a large rabbit out of the hat, and fast, to improve these difficult conditions and prevent a further entrenchment of gloom and contraction this summer."

Blane Perrotton, managing director of property consultancy and surveyors Naismiths, said: “There is precious little to cheer in this altogether bleak PMI report. New orders, confidence levels and recruitment are all down. Housebuilders have managed to keep growing, just. But their modest expansion in output has been dwarfed by the declines in commercial property and infrastructure building. While the residential sector is stoically grinding on, the industry as a whole is running to stand still. With investor confidence being pummelled by a double whammy of Brexit and political uncertainty, what work there is dominated by the completion of existing projects rather than new ones.”

Jonathan White, UK head of infrastructure, building and construction at KPMG, said: “The steady stream of infrastructure work across the UK had strengthened order books and buoyed confidence, but there is a clear sense that the market is slowing down in the commercial sector as the Brexit impasse puts a halt on decision-making. The hope is that the forthcoming Infrastructure Finance Review, for which the consultation closes later this week, will offer some clarity on how to finance the projects that will feed contractors’ pipelines in the future.”

Mark Robinson, Scape Group chief executive, said: “The lack of clarity over the future leadership of the current government is hurtling us into uncertainty. We thought progress in infrastructure and safeguarding the future of the construction industry was a low priority before. It will be even further from ministers’ minds now. This government won its mandate on a commitment to invest in UK plc, ensuring the country continues to attract business and good jobs across the whole country. But now a reluctance to spend and a lack of decision making is holding the UK back, stopping the country reaching its potential. 

“The only way to increase confidence is to treat today’s economic and political climate as the new normal. That means we need to get on with the business of building. Firms should take advantage of the easing of raw material costs while they can and press ahead with planned projects. Only then can we ensure that this weak period for the sector does not turn into a prolonged and painful slump.”

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