UK construction companies indicated a renewed decline in total business activity during May according to the latest IHS Markit/CIPS UK Construction Total Activity Index. Commercial work and civil engineering activity weakened further but was offset by a modest increase in house building. New orders also decreased across the construction sector, with survey respondents noting that subdued domestic economic conditions had led to project delays and fewer tender opportunities.
May data also revealed a decline in civil engineering activity for the fourth consecutive month. Construction companies cited constrained client budgets and a headwind from domestic political uncertainty.
Residential work continued to expand in May, albeit at the weakest pace for three months. Higher levels of house building have been recorded in each month since February 2018.
At 48.6 in May, down from 50.5 in April, the headline seasonally adjusted Index registered below the 50.0 no-change mark for the third time in the past four months. The latest reading was the lowest since the snow-related downturn in construction output during March 2018.
Tim Moore, Associate Director at IHS Markit, which compiles the survey, said: “May data reveals another setback for the UK construction sector as output and new orders both declined to the greatest extent since the first quarter of 2018. Survey respondents attributed lower workloads to ongoing political and economic uncertainty, which has led to widespread delays with spending decisions and encouraged risk aversion among clients.
“Commercial building remained hardest-hit by Brexit uncertainty, with construction firms reporting the steepest fall in this category of activity since September 2017. Civil engineering work also dried up in May and a fourth consecutive monthly fall in activity marked the longest period of decline since the first half of 2013. Construction companies often commented that recent tender opportunities for civil engineering work had been insufficient to replace completed projects.
“House building was the only sub-category of construction output to buck the downward trend in May, but growth remained softer than on average in 2018.”
Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply: “A fragile dreariness descended on the sector this month with lower workloads leading to the fastest decline in purchasing of construction materials since September 2017. With the continuing uncertainty around Brexit and instabilities in the UK economy, client indecision affected new orders which fell at their fastest since March 2018 and particularly affected commercial activity.
“The previously unshakeable housing sector barely kept its head above water, growing at its weakest level since February as residential building started to lose momentum. The biggest shock however, came in the form of job creation as hesitancy to hire resulted in the largest drop in employment for six and a half years. Not much to be happy about it seems though an easing in some input costs for raw materials offered some relief while energy and fuel prices continued to rise.”
Average input prices continued to rise in May, which was often attributed to higher fuel and energy costs. However, the overall rate of input price inflation eased to its weakest since June 2016.
Meanwhile, construction firms signaled a fall in business optimism to its weakest since October 2018. Survey respondents widely cited concerns that domestic political and economic uncertainty would dampen business activity growth over the next 12 months.