Construction looses momentum as Brexit fears hold back investment

October 2018

August data pointed to a slowdown in output growth across the UK construction sector, with all three broad categories of activity recording a loss of momentum. That said, there were signs of resilience in terms of underlying workloads, with a solid upturn in new business.

At 52.9 in August, the seasonally adjusted IHS Markit/CIPS UK Construction Purchasing Managers’ Index eased from July’s 14-month peak of 55.8.  This signalled a moderate rise in output, but the growth rate was the weakest since May.

Commercial building was the best performing area in August, followed by residential work.  However, the latest expansion of housing activity was the weakest since March. Meanwhile, work on civil engineering projects decreased for the first time in five months.

The latest data revealed a slowdown in new business growth from July’s 14-month peak.  Anecdotal evidence cited resilient client demand and supportive economic conditions, but there were also reports that Brexit-related uncertainty continued to hold back investment spending. Higher overall workloads encouraged additional staff recruitment across the construction sector in August, but there is a shortage of suitably skilled candidates to fill vacancies.

Purchasing activity increased for the eleventh consecutive month in August, although the latest upturn was the weakest since March.  Low stock and labour shortages among suppliers continued to impact on delivery times for construction products and materials.  Despite stretched supply chains and rising energy-related costs, latest data indicated that input price inflation edged down to its lowest since July 2016.

UK construction companies are optimistic that business activity will expand over the coming 12 months, but the degree of confidence eased to its weakest since May.

Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply, says: “Cracks in the construction sector’s masonry were beginning to show again this month, and the house building sub-sector was hit the hardest as it reported the poorest performance since March this year.  Civil engineering saw a drop off in larger infrastructure projects. Though the path to Brexit is paved with good intentions, without significant progress the sector will soon be building castles in the air rather than on solid ground.”   Latest stats on page 18.

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