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Construction sector nose-dives as businesses prove reluctant to embark on large developments

Last month saw a substantial decrease in new building projects, causing a decline in the British construction Sector, exacerbated by the housing market’s lethargy.

Construction Companies’ reluctance to commit to new projects has slowed sector development to lowest seen since the market suffered a blow after the Brexit vote last August.

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The instrumental IHS Markit survey, the purchasing managers’ index (PMI), indicates a slump of 51.9 in July this year, an acute contrast to June’s figures of 54.8, which has been attributed to client caution.

With the index still above 50, showing continued expansion, the rate of growth is severely curtailed.

 

This is the first time the rate of new orders has fallen since August 2016, with the PMI revealing a decline from 53 to 48.1, placing it below the critical 50 level and indicating negative trends which could hamper future growth.

With an indicator of 47.6, the commercial property sector showed a reduction in building activity, as “survey respondents cited delays in decision making by clients, linked to worries about the economic outlook and heightened political uncertainty”.

Housing activity faired a little better with a reduction from 57 to 54.4 which is indicative of continued growth, and civil engineering enjoyed a positive spurt from 53.4 to 54.

 

The economic downturn has forced companies to slow down plans to increase employment and negatively impacted this index subdivision with a reduction of 2.1 from June to July, with July hitting 52.1 – comparative again to last August’s slump.

Duncan Brock from the Chartered Institute of Procurement & Supply said, “Continuing price pressures from the weak pound lingered, driving cost inflation near to a six-year peak, stifling purchasing activity and jobs growth,”

Mr Brock went on to assert that the start of the third quarter was “challenging” and that “…there are possible roadblocks ahead for the sector in the rest of 2017, with longer lead times and suppliers struggling with stock levels, which adds insult to injury.”

In contrast, the PMI for the manufacturing sector enjoyed an upsurge in July which saw it reach 55.1.

Manufacturers producing goods for export have enjoyed the positive consequences of the sterling’s drop, while growth in import inflation had a negative impact on the building industry.

Factories have also benefitted from positive developments throughout global economy, while this has had little beneficial impact on construction companies.