Buyers see return to growth but dark clouds gather

Date: 03 Nov 2017

Construction buyers reported a return to growth in October but confidence for the next 12 months dropped to its lowest level for nearly five years.

The bellwether Markit/CIPS UK Construction Purchasing Managers’ Index rose above the crucial 50 mark to 50.8 in October.

It dipped below that in September to 48.1 signifying a reduction in workloads for the first time in 13 months.

House building led the rise but the index measuring construction firms’ expectations for business activity over the year ahead signalled that optimism dipped to a 58-month low in October.

Anecdotal evidence widely linked the drop in confidence to concerns about UK economic prospects and a lack of new projects in the pipeline.

Tim Moore, Associate Director at IHS Markit and author of the report said: “Greater house building was the sole bright spot in an otherwise difficult month for the construction sector.

“Sustained declines in civil engineering and commercial activity meant that large areas of the building industry have become stuck in a rut.

“Reduced tender opportunities and fragile demand are placing a dark cloud over the near-term outlook.

“October survey data indicated that UK construction companies are now the least confident about their forthcoming workloads since December 2012.

“The recent soft patch for civil engineering activity has been the most severe for around four-and-a-half years, linked to a shortfall of new contracts to replace completed work on infrastructure projects.”

Mike Chappell, global corporates managing director for construction at Lloyds Bank Commercial Banking, said: “Sentiment will differ across the sector, but those at the top of the supply chain are not dwelling too much on Brexit uncertainty and this PMI suggests September’s reading may have been a blip.

“While the Budget is only a few weeks away, contractors are operating on the basis that there will be no construction-friendly giveaways in the chancellor’s statement. Anything that materialises will therefore be a bonus.

“Firms continue to focus on bidding discipline in an effort to avoid a repeat of the issues that plagued the sector after the financial crisis.

“Many contract cycles are now much shorter, reducing risk and hopefully putting the industry on a firmer footing in the face of the ongoing uncertainty.”


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