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Monday 18 November 2019

Construction sector declines for sixth consecutive month

Big building projects remain on hold due to political and economic uncertainty in the UK.

The latest construction PMIs show the sector is still shrinking (Jonathan Brady/PA)
The latest construction PMIs show the sector is still shrinking (Jonathan Brady/PA)

By Simon Neville, PA City Editor

The construction sector continued to be hit by the political and economic uncertainty in the UK as the latest data showed the industry in decline.

There was a minor improvement in October compared with September, according to the closely-followed IHS Markit / CIPS construction purchasing managers’ index (PMIs), but significant concerns remain.

The PMIs came in at 44.2 for October, with anything below 50 seen as a contraction, marking six consecutive months of sector decline.

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Construction PMIs in the UK (IHS / PA)

Data is collected through interviews with purchase managers to test sentiment and real-time information on the state of an industry.

The research also found that construction companies continued to reduce their workforce numbers in October, due to weak order books and concerns by managers of the near-term business outlook.

October’s data was slightly up on September, which was 43.3 but is still close to the 10-year low recorded in June at 43.1.

Civil engineering was the worst performing area, with business activity falling at the sharpest pace since October 2009.

House building also decreased at a faster rate last month, with residential work seeing the biggest drop in three years. Commercial construction also fell – for the tenth month in a row, but the speed of decline did slow, researchers added.

According to the data, companies said customers continue to put off making big spending decisions due to the political uncertainty from Brexit, and the lack of work was also driving costs down creating more widespread discounting.

Tim Moore, economics associate director at IHS Markit, which compiles the survey, said: “There are clear signs that construction firms are positioning for an extended soft patch for project starts, as highlighted by a further decline in purchasing volumes and another month of cuts to workforce numbers through the non-replacement of voluntary leavers.”

Given that the next political hurdle is December’s General Election, all eyes will be on the new administration and clear direction, because at the moment there is little insight into what could possibly pull the sector out of its ditch. Duncan Brock

Business optimism for the year ahead also remains at the weakest levels since 2012, although there was hope that large-scale civil engineering projects could improve the sector.

Duncan Brock, group director at the Chartered Institute of Procurement & Supply, said: “To say these figures are disappointing is a big understatement.

“Given that the next political hurdle is December’s General Election, all eyes will be on the new administration and clear direction, because at the moment there is little insight into what could possibly pull the sector out of its ditch.”

Tuesday brings the latest PMIs for the all-important services sector, which accounts for four fifths of the UK economy, following a reading of 49.5 for September.

On Friday the manufacturing sector recorded a score of 49.6 in October, which was an improvement on the 48.3 score in September – although this was mainly put down to stockpiling ahead of the now-delayed October 31 Brexit day.

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