Sharp slowdown in construction as clients’ more reluctant to invest

Worries about UK economy behind construction slowdown. Reduced investment also having knock-on impact on job creation.

The latest Purchasing Managers’ Index (PMI) data for UK construction showed a sharp slowdown in July to 51.9 from 54.8 in June. The construction industry accounts for around 6% of the UK economy.

The report from IHS Markit and CIPS said it marked an 11-month low for construction with commercial work falling at its fastest pace for 12-months and a softer expansion of housing activity. Supply chain pressure pressures added to the challenges facing the industry with prices for materials rising at a sharp rate.

The survey also suggested a hesitancy to invest with respondents citing “delays in decision-making by clients, linked to worries about the economic outlook and heightened political uncertainty”. In addition to decisions being delayed, businesses also said clients showed a “greater reluctance to commit to new projects”. The report said this has led to significantly fewer new business orders and more cautious recruitment.

Commenting on the results, IHS Markit associate director Tim Moore said “worries about the economic outlook and heightened political uncertainty were key factors contributing to subdued demand” and that “there was a knock-on impact for job creation”. It’s a clear sign that reduced investment means fewer jobs.

CIPS director of customer relationships Duncan Brock noted that whilst a slowdown in commercial building was the main contributor to the figures, marginally slower housebuilding growth continued to be a concern.

Housing, the shining light of the sector eased marginally, but produced the slowest growth since April, as parallels with the darker days of Brexit, worries about the UK economy and post-election uncertainty can be seen across the construction sector.

Duncan Brock, director of customer relationships, CIPS

There was better PMI data in July for the manufacturing industry, which was boosted by a growth of new export orders. PMI data for services, which accounts for 80% of the economy is due tomorrow.

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