UK construction shrinks for third consecutive month
The latest PMI data of 45.3 is lower than expected, but better than the 10-year low recorded in June.
The UK construction sector shrunk for the third month in a row as political uncertainty saw confidence sink to the lowest level since November 2012, according to data.
The closely followed IHS Markit/CIPS UK Construction Total Activity index hit 45.3 points in July, which was an improvement on the 10-year low June figure of 43.1, but was still in negative territory.
Anything below 50 is considered in decline and Friday’s numbers means the UK’s construction sector has contracted in five of the last six months. Analysts had predicted a score of 46.
The data suggested falls for all three areas measured – commercial, house building and civil engineering – but commercial construction was hit the hardest.
Commercial projects were held back due to risk aversion over Brexit uncertainty, according to the report, adding there had been delays in infrastructure work.
The house-building sector declined for the second month in a row, but was not as badly affected as the other two areas, the report said.
If the current speed of construction sector retrenchment is sustained, it will soon ripple through the supply chain Tim Moore, IHS Markit
“Reports from construction companies suggested sluggish housing market conditions had a negative influence on residential work during the latest survey period,” it said.
Tim Moore, economics associate director at IHS Markit, said: “Construction companies have started to respond to lower workloads by cutting back on input buying, staffing numbers and sub-contractor usage.
“If the current speed of construction sector retrenchment is sustained, it will soon ripple through the supply chain and spillovers to other parts of the UK economy will quickly become apparent.”
The weak pound in July also had a negative impact, particularly with buying products, such as insulation and plasterboard, from overseas.
Kate Kirby, partner in the construction team at law firm DWF, said: “The UK construction PMI figures illustrate the impact of global trade tensions and Brexit uncertainty that has resulted in construction activity falling for the third month in a row.
“The underlying data is unfortunately pretty dark but speaking to various agents in the city we are confident the future will be brighter, a lack of transparency caused by Brexit ambiguity is holding back investment and confidence but it won’t last forever.”