UK construction companies indicated a sustained increase in business activity during September, but the rate of expansion slowed for the second month running.
At 52.1 in September, down from 52.9 in August, the seasonally adjusted IHS Markit/CIPS UK Construction Purchasing Managers’ Index (PMI) signalled the weakest upturn in output for six months.
Civil engineering was the worst performing sub-category of construction work, with activity declining at a slightly quicker rate in September. House building and commercial construction continued to increase at a solid pace, although the latest survey indicated weaker growth than in August.
A number of firms suggested that subdued economic conditions so far in 2018 remained a factor holding back business activity growth.
In contrast to the trend seen for construction output, latest data pointed to a faster rise in new business volumes. The rate of new order growth picked up to its strongest since December 2016, which firms attributed to resilient demand and an upturn in new invitations to tender.
Delivery times for construction products and materials continued to lengthen in September. Intense supply chain pressures were attributed to stock shortages at
vendors and stretched transportation capacity. That said, the latest downturn in vendor performance was slightly less marked than the three-and-a-half year low seen during August.
Rising demand for inputs contributed to a sharp and accelerated increase in average cost burdens during September. The overall rate of input price inflation was the fastest for three months. Survey respondents widely cited higher fuel prices andgreater raw material costs (particularly timber).
September data indicated a further decline in optimism about the year ahead business outlook. The degree of positive sentiment reported by survey respondents was the second-lowest since February 2013. Construction companies noted that political uncertainty and investor concerns about Brexit had dampened confidence in September.
Where a rise in business activity was projected, forthcoming energy and transport projects remained the main areas of optimism.
Mark Robinson, Scape Group Chief Executive, said: “Despite slightly weaker growth in output in September, it is promising to see new order growth pick up to its strongest since December 2016, even with the ongoing talk around a potential ‘no deal’ Brexit scenario. However we must not be complacent – Brexit presents very real risks for the public sector and the economy, and it is important that firms are able to maintain momentum as we edge closer to our EU exit date.
“The key to growth is pushing ahead with significant investment which fosters long-term growth and connectivity, so I disagree with renewed calls from some politicians for work on HS2 to be paused. However, clearly, a greater emphasis must be placed on projects across the North in order to create the step change in rail travel that the country truly needs.”
“Crucially, we need to see cross-party consensus on infrastructure decision making to end this ‘stop and start’ process. Too often ministers make decisions based on short-term political gain rather than the long-term value of projects, despite the fact that all parties agree that increased infrastructure investment is needed to bolster the UK economy.
“September also saw a dip in housebuilding growth, yet the UK’s housing shortage remains. In the run-up to the Autumn Budget minsters should seriously think about the role that local councils can play in affordable housing delivery. We cannot rely on private businesses to deliver the stock we need, instead, greater resources and powers should be passed on to local councils.”
