Construction buyers report falling workloads in May | Construction Buzz #220
The IHS Markit/CIPS UK Construction Total Activity Index recorded 48.6 in May down from 50.5 in April.
The index has now registered below the 50.0 no-change mark three times in the past four months.
Lower volumes of commercial work and civil engineering activity more than offset a modest increase in house building leading to the sharpest decline in construction output since March 2018.
Brexit paralysis continued to hit commercial work which suffered its steepest fall since September 2017.
Reduced workloads also led to more cautious recruitment strategies creating the sharpest drop in construction employment for six-and-a-half years.
Tim Moore, Associate Director at IHS Markit, which compiles the survey said:“May 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.
“Commercial building remained hardest-hit by Brexit uncertainty, with construction firms reporting the steepest fall in this category of activity since September 2017.
“Civil engineering work also dried up in May and a fourth consecutive monthly fall in activity marked the longest period of decline since the first half of 2013.
“Construction companies often commented that recent tender opportunities for civil engineering work had been insufficient to replace completed projects.
“House building was the only sub-category of construction output to buck the downward trend in May, but growth remained softer than on average in 2018.
“The soft patch for construction work so far this year has started to impact on staff hiring, with some firms cutting back on expansion plans and others opting to delay the replacement of voluntary leavers.
“May data revealed that the latest fall in employment numbers was the steepest for six-and-a-half years. Survey respondents once again noted concerns that the subdued domestic economic outlook and delays related to Brexit uncertainty had curtailed their near-term growth prospects.”
Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply said:“A fragile dreariness descended on the sector this month with lower workloads leading to the fastest decline in purchasing of construction materials since September 2017.
“With the continuing uncertainty around Brexit and instabilities in the UK economy, client indecision affected new orders which fell at their fastest since March 2018 and particularly affected commercial activity.
“The previously unshakeable housing sector barely kept its head above water, growing at its weakest level since February as residential building started to lose momentum.
“The biggest shock however, came in the form of job creation as hesitancy to hire resulted in the largest drop in employment for six and a half years. Not much to be happy about it seems though an easing in some input costs for raw materials offered some relief while energy and fuel prices continued to rise.
“This is unlikely to be nearly enough to turn around the sector’s fortunes, as optimism about the strength of the sector’s future was the lowest since October 2018. 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.”