Construction remains subdued in May

The latest seasonally adjusted IHS Markit/CIPS UK Construction Purchasing Managers’ Index® (PMI® ) has been released, showing that construction activity remains subdued as the year progresses, with PMI remaining unchanged at 52.5.

Following a slow start to the year, hampered by winter weather continuing into March, firms reporting have stated that the current good weather is allowing them to catch up on site.

With the industry rapidly approaching the half-year mark, figures are reflecting only a modest growth during a period of political and economic uncertainty for the sector.

Residential work is still the best performing sector, continuing a three-month period trend, although the pace of expansion eased from an 11^th month high in April.

Other sectors performing well for the industry include commercial, which saw growth accelerate to a three-month high, while civil engineering activity also remained in growth for the second month running.

However, new business slipped into decline, prompting uncertainty to return to the industry from a confident start to the year. Evidence from respondents pointed towards the continued political and economic uncertainty, as well as subdued retail sector conditions and fragile business confidence leading to a dip in demand and a seven month low in future prospects.

This fragile confidence was reflected into the jobs market, with job creation dropping to a four-month low in the latest survey. Companies also reported on the struggle to find skilled workers.

Purchasing costs rose sharply in May, with the rate of input price inflation running at its highest since February. Elevated fuel costs and higher plastic and steel-related input prices were noted by survey respondents.

Sam Teague, Economist at IHS Markit and author of the IHS Markit/CIPS Construction PMI®, comments: “The May PMI data signalled an unchanged pace of activity growth across the UK’s construction sector since April’s somewhat underwhelming rebound, yet nevertheless indicating a recovery in the second quarter after the contraction seen at the start of the year.

“However, activity in May was once again buoyed by some firms still catching up from disruptions caused by the unusually poor weather conditions in March, and a renewed drop in new work hinted that the recovery could prove short-lived.

“Inflows of new business slipped back into decline, signalling the resumption of the downward trend in demand seen during the opening quarter. Companies frequently noted that Brexit uncertainty and fragile business confidence led clients to delay building decisions in May.

“With new order books deteriorating and cost pressures picking back up, it’s not surprising to see construction firms taking a dimmer view of prospects and pulling-back on hiring, all of which makes for a shaky-looking outlook.”

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