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Residential construction work grows at slowest pace for 22 months

UK construction companies indicated a sustained upturn in overall business activity during March, but the pace of expansion remained relatively subdued in comparison to the trends seen for much of the past three years. That’s according to the seasonally adjusted Markit/CIPS UK Construction Purchasing Managers’ Index®.
At 54.2 in March, the Index was above the neutral 50.0 value for the thirty-fifth month running. However, the latest reading was unchanged since – the joint-slowest rate of output growth since June 2013.

Faster rises in commercial work and civil engineering activity were offset by another slowdown in residential building, with any latest increase in housing activity only marginal and the weakest recorded since January 2013.

The latest data signalled the weakest rise in new work received across the construction sector since the pre-election slowdown in April 2015.

Tim Moore, Senior Economist at Markit and author of report , said: “March’s survey confirms that the UK construction sector is experiencing its weakest growth phase since the summer of 2013. Residential building has seen the greatest loss of momentum through the first quarter of 2016, which is a surprising reversal of fortunes given strong market fundamentals and its clear outperformance over the past three years.

“Construction firms were reliant on a rebound in commercial building and resurgent civil engineering growth to offset the slowdown in housing activity. Civil engineering delivered its strongest performance for just over a year, suggesting that a healthy pipeline of infrastructure projects continues to boost construction output.

“However, heightened uncertainty about the business outlook appears to have weighed on overall construction demand so far in 2016, with survey respondents citing cautious client spending patterns and a reduced willingness to commit to new projects.”

David Noble, Group Chief Executive Officer at the Chartered Institute of Procurement & Supply, said: “There was little comfort to be had this month, as the construction sector was awash with caution and hesitancy not seen since the pre-election lull of 2015. Clients were unwilling to commit to new contracts or expand existing work, meaning that new business growth was at its most fragile since April 2015.

“Where the housing sector was once the star of the show, it became the weakest performer in March. And hopes for more positive employment news were dashed, as the rate of growth in staffing levels slowed to a pace last seen in June 2013; and amidst a landscape of continuing skills shortages after the end of the recession. There was evidently a loss of momentum in the sector, though cautious optimism was sustained as a result of encouraging domestic economic conditions, but against a background of some political uncertainty.”

About Fiona Russell-Horne

Group Managing Editor across the BMJ portfolio.

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