UK construction growth eases in March
Loss of momentum in housing offsets rebound in commercial and civil engineering activity
ACCORDING to the latest Markit/CIPS UK Construction Purchasing Managers’ Index (PMI), data for March revealed a slowdown in growth across the UK construction sector, led by a weaker rise in residential building activity.
The latest survey also pointed to only a marginal increase in new work, although construction companies are said to remain relatively upbeat about their near-term growth prospects – partly reflecting a stabilization of client confidence from the post-referendum lows seen in 2016 – with optimism regarding year-ahead business activity having picked up in March to reach its second-highest level since December 2015.
The seasonally adjusted Markit/CIPS UK Construction PMI dropped from 52.5 in February to 52.2 in March, signalling the joint-slowest upturn in overall construction output since the current period of expansion began in September 2016.
The softer growth primarily reflected a loss of momentum in housing activity, which offset a rebound in both commercial and civil engineering activity. The latest increase in work on civil engineering projects was the fastest so far in 2017 and the strongest of the three sub-categories monitored by the survey in March.
Subdued new business growth persisted in March, with the rate of expansion unchanged from the four-month low seen in February. Construction companies noted that squeezed client budgets had acted as a brake on new business growth, and there were also reports citing planning delays and greater cost-consciousness among clients.
At the same time, survey respondents noted that reduced Brexit-related anxiety and the resilient economic backdrop had a positive impact on new invitations to tender. This helped underpin an improvement in business confidence regarding the growth outlook, with almost half of the survey panel expecting a rise in business activity during the year ahead, against only 9% forecasting a decline.
Tim Moore, senior economist at IHS Markit and author of the Markit/CIPS Construction PMI, said: ‘UK construction firms experienced a growth slowdown in March, with the loss of momentum centred on house building. A weaker trend for residential work has been reported throughout 2017 so far, which provides an indication that the cooling UK housing market has started to act as a drag on the construction sector.
‘Civil engineering projects were the construction sector’s main growth engine in March, driven by rising infrastructure spending and a strong pipeline of new work throughout the UK.
‘March data showed a slight rebound in commercial construction activity. Survey respondents noted that the resilient economic backdrop and receding Brexit-related anxieties had helped to stabilize client demand after the disruption to development projects last summer.
‘Despite a relatively subdued rise in new work during March, UK construction firms reported a more sanguine assessment of their year-ahead growth prospects. Business confidence was among the highest seen since the end of 2015, which construction companies linked to upcoming tender opportunities, plans for increased marketing expenditure and hopes of a sustained recovery in clients’ willingness to spend.’
