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Construction industry growth softens in June

The UK construction industry experienced a slowdown in growth in June according to the latest IHS Markit/CIPS UK Construction PMI figures.

Economic and political uncertainty stemming from the General Election led to another bout of risk aversion amongst clients and was a key factor in the loss of momentum in the sector.

June saw growth drop to 54.8 from May’s figure of 56.0 but was above the growth threshold of over 50.0 for the tenth consecutive month.

Residential building was the strongest performing sector, coming out on top against both the commercial and civil engineering sectors.

Such was the growth of housing activity in June, that the increase in activity was the second fastest since December 2015.

Respondents said the lack of new work to take the place of completed projects stifled growth, as new order growth fell to its weakest since March.

Employment levels within the industry in June dropped to their lowest levels for three months.

There was less optimism amongst construction companies as confidence dropped to its lowest levels since December last year.

The demand for construction materials continued, almost reaching May’s 16-month peak.

Construction firms reported another sharp rise in their average cost burdens in June. The overall rate of inflation rebounded since May and was the strongest for three months.

Tim Moore, Senior Economist at IHS Markit said: “Survey respondents commented on renewed caution among clients, in response to heightened political and economic uncertainty. Fragile business sentiment led to delayed decision-making on large projects and greater concern about the outlook for workloads during the next 12 months.

“While construction firms remain upbeat overall about their near-term growth prospects, the degree of confidence fell to its lowest so far this year.

“Despite a softer rise in construction output, the latest survey revealed that supply chain pressures were among the most intense since early-2015. June data also pointed to strong input price inflation, driven by resilient demand and upward pressure on costs imported construction materials.”

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