Construction output drops in September as new orders dry up
Activity in Britain's construction industry unexpectedly contracted for the first time in 13 months in September as a drop in new orders and civil engineering work dragged on the sector.
The Markit/CIPS UK Construction purchasing managers' index (PMI) showed a reading of 48.1 last month, down from 51.1 in August, and falling well below economists' expectations for a steady reading of 51.1.
A reading above 50 indicates growth.
It was the first drop in overall business activity in the sector since August 2016 and was the fastest decline in overall construction output since July 2016.
The survey said September was a "difficult month" for the sector, having suffered from a fall in input buying and new work, which saw its third straight month of decline.
Tim Moore, an associate director at IHS Markit and author of the report, said: "A shortfall of new work to replace completed projects has started to weigh heavily on the UK construction sector.
"Aside from the soft patch linked to spending delays around the EU referendum, construction companies have now experienced their longest period of falling workloads since early 2013."
Respondents said the drop in workloads was linked to "fragile confidence" and "subdued risk appetite" among their clients, particularly in the commercial building sector, which felt the second-sharpest decline since February 2013. The industry also experienced the sharpest fall in civil engineering work since April 2013 as a lack of new infrastructure projects failed to make up for completed contracts.
House building was the only sub-sector that experienced growth last month, and even then saw growth levels hit a six-month low amid fears over "less favourable market conditions" in the months ahead.
Overall, there was a weak rise in job creation, and subdued demand has been blamed for another fall in the use of subcontractors.
"At the same time, cost pressures have intensified, driven by supply bottlenecks and rising prices for imported materials," Mr Moore added, as inflationary pressures rose to a seven-month high.
Howard Archer, chief economic adviser for the EY Item Club, said the "thoroughly disappointing" survey suggests the construction industry slowdown could end up weighing on wider economic growth.
Attention will now turn to the closely-watched PMI survey covering services, due out today.