UK construction output increases sharply but outlook paints ‘less rosy picture’
UK construction output increases sharply but outlook paints a “less rosy picture” as Brexit uncertainty hits confidence and new orders.
The rate of expansion in the construction sector in October was the second fastest in 16 months due to a “rebound” in civil engineering activity in the UK, according to the closely-followed IHS Markit/ CIPS Purchasing Managers’ Index (PMI) figures.
PMI rose to 53.2, up from 52.1 in September to continue a trend which has seen construction output rise every month since April.
Civil engineering led the way, having declined in August and September, while house building and commercial construction continued growth at solid but slower rates than in recent months.
But the rate of new contract growth was the weakest in five months and companies warned of intense market competition and “client hesitation” in the face of Brexit and economic uncertainty.
The report said the business expectations index had fallen to a six-year low and firms also highlighted strong cost pressures, including increased fuel, labour, timber and steel costs.
“Although total UK construction activity rose at a stronger pace in October, the underlying survey data paint a less rosy picture for the sector towards the end of the year,” IHS Markit economics director Trevor Balchin, said.
“New contracts increased at only a modest pace, and firms were the least optimistic regarding the 12-month outlook for nearly six years. Construction companies again linked uncertainty to Brexit negotiations, which influenced delays to final decisions at clients,” he added.
Max Jones, infrastructure and construction expert at Lloyds Bank said it was “another fairly modest” movement in the sector.
He said: “While other sectors are being cautious, the UK focus of the construction industry provides some insulation, although as a cyclical sector, firms are continuing to shore up balance sheets to ensure they’re in the best position should there be any economic shocks to withstand.”