Industry activity hits three-month low in December as uncertainty continues to rise
The UK construction sector ended 2018 on a weaker footing, hitting a three-month low in December amid fading demand for commercial projects and the growing risk of a no-deal Brexit.
According to the Markit/Cips UK construction purchasing managers’ index(PMI), which is closely watched by the Bank of England and the Treasury as an early warning gauge for the UK economy, the building trade suffered a slowdown in activity in December.
The PMI dropped to 52.8 in the final month of the year, from 53.4 in November, missing economists’ forecasts. A reading above 50 indicates growth.
The latest snapshot revealed construction companies hit a weaker patch during the last month of 2018 as new orders increased at a relatively subdued pace, while there were some reports that wet weather disrupted work.
The slowdown largely reflected softer activity in the commercial sector at a time of rising uncertainty for businesses considering building projects with less than 90 days to go before Brexit.
Tim Moore, the economics associate director at IHS Markit, said: “Subdued domestic economic conditions and an intense headwind from political uncertainty resulted in the weakest upturn in commercial work for seven months.”
Howard Archer, the chief economic adviser to the EY Item Club forecasting group, said: “Some companies’ willingness to commit to major new projects at this stage is being limited by Brexit uncertainties and concerns over the economy.”
While activity faded in December, strong demand for residential property among first-time buyers helped support the levels of work for housebuilders, while civil engineering activity rose at the quickest rate since May 2017.
Despite concerns over delays to major civil engineering projects, such as the building of Crossrail in London, analysts said construction companies would be hoping the government would push to get other infrastructure projects up and running this year.
Companies in the PMI survey reported improved confidence in their outlook for construction activity for the year ahead, although economists said activity would likely remain subdued amid labour shortages.
Max Jones, a construction specialist at Lloyds Bank, said: “While December was marked by further political uncertainty, the main challenges likely to be keeping construction bosses awake at night are more sector-specific, such as delays to projects being signed off and ongoing concerns about labour supply.”