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Construction activity remained lacklustre in May

Output in the construction sector stayed steady despite a bout of good weather.

Output in the construction industry held steady in May, as firms continued to play catch up from a period of severe weather in the first quarter.

The Markit/CIPS UK Construction purchasing managers’ index (PMI) remained at 52.5 last month, beating consensus estimates which predicted a reading of 52.

A reading above 50 indicates growth. Following the announcement, sterling nudged up 0.12% against the US dollar at 1.336.

Commercial activity improved, but there was slower growth in both residential and civil engineering projects.

Companies frequently noted that Brexit uncertainty and fragile business confidence led clients to delay building decisions in May Sam Teague

Housebuilding remained the strongest sub-sector in the industry, with a PMI of 55.7, as compared to  52.2 and 50.6 for the commercial and civil engineering sectors respectively.

Samuel Tombs, chief economist at Pantheon Macroeconomics, said: “The long investment time horizons for both commercial and civil engineering projects mean that both sectors likely will remain depressed until some clarity emerges over the UK’s long-term relationship with the EU.”

Some companies said the unusually good weather helped them to rebound from the hit they experienced from the Beast from the East.

New order books slipped into decline during the month, falling for the fourth time in the past five months.

Respondents said political uncertainty and a weaker retail sector knocked demand for new construction projects.

Job creation also slowed to a four-month low, with companies saying there was a shortage of skilled workers.

Sam Teague, economist at IHS Markit, said: “Companies frequently noted that Brexit uncertainty and fragile business confidence led clients to delay building decisions in May.

“With new order books deteriorating and cost pressures picking back up, it’s not surprising to see construction firms taking a dimmer view of prospects and pulling-back on hiring, all of which makes for a shaky-looking outlook.”

Purchasing costs rose sharply in May, registering the steepest rate of price inflation since February. This was due to higher costs for fuel, plastic and steel-related products.

Supplier delivery times also worsened, with some businesses complaining that suppliers were short of materials.

Duncan Brock, group director at the Chartered Institute of Procurement & Supply, said: “Higher prices for fuel, raw material shortages, higher labour costs combined with slow delivery times were further obstacles to growth as firms nervously assessed their workforce for much-needed talent, and sub-contractors could name their price.”

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