04/01/2019

Construction growth falters due to Brexit uncertainty

Telegraph-Logo

UK construction firms faced a tough start to 2019, with the industry reporting that a collapse in business confidence held back demand for commercial building work at the end of 2018.


Construction output was at its weakest in three months in December, reported by IHS Markit’s purchasing managers index (PMI), a notable survey of senior executives at major construction firms.

A number of those surveyed for the report highlighted that heightened political uncertainty had encouraged delays to spending decisions among clients, especially in relation to commercial development projects.

Whilst December’s seasonally adjusted figure came in at 52.8 - which is above the 50 mark that would indicate flat growth - it was below the 53.4 recorded in November and beneath economists’ expectations.

With a slight rise in new orders and a softening in overall activity growth, firms continued to be impacted by Brexit-related uncertainty and reluctance by clients to place orders.

Duncan Brook, Chartered Institute of Procurement & Supply (CIPS)

In a further breakdown, housing, which was the fastest-growing part of the commercial building work sector last year, continued to expand but experienced a slowdown in momentum. 

Bucking the overall trend was civil engineering - including large infrastructure projects, roads and airports – which was particularly resilient, rising more quickly than in any of the previous 18 months.

As reported in The Telegraph, our group chief executive Mark Robinson said the slowdown appeared to be a "temporary blip... as business optimism reached its highest level since April".

As industry optimism is pegged to large-scale infrastructure projects, it is essential that the government commits to their delivery and projects don’t fall by the wayside due to the electoral cycle.

Mark Robinson, Scape Group chief executive

The PMI found optimism in the sector had bounced back from a six-year low in October, as builders look forward to major transport and energy projects set to kick off this year. IHS Markit’s Tim Moore said business confidence was also boosted by a slowdown in cost inflation and signs of improvement in supply chains.

Tim Moore concluded: "However, levels of optimism remained subdued in relation to those recorded by the survey over much of the past six years, largely reflecting concerns that Brexit uncertainty will continue to encourage delays with decision-making, especially on commercial projects."

Sign up to receive regular updates from Scape, including the latest news and Insight Magazine.

Your subscription has been confirmed. You've been added to our list and will hear from us soon.

Back to top