Civils work pushes up industry activity but Brexit casts a gloomy shadow

Civil engineering drove industry growth in October as construction buyers reported their second highest level of activity in 16 months.

The IHS Markit/CIPS UK hit 53.2 in October – up from 52.1 in September.

But the looming shadow of Brexit meant firms were the most pessimistic about future prospects in nearly six years.

Civil engineering rose at the strongest pace since July 2017 while house building and commercial construction both increased at solid rates in October.

Cost pressures in the UK construction sector remained strong in October, despite the rate of input price inflation easing to a 27-month low.

Firms highlighted increased fuel, labour, timber and steel costs. Subcontractor rates also continued to rise at a relatively strong pace during the month.

Trevor Balchin, Economics Director at IHS Markit, which compiles the survey said: “Although total UK construction activity rose at a stronger pace in October, the underlying survey data paint a less rosy picture for the sector towards the end of the year.

“New contracts increased at only a modest pace, and firms were the least optimistic regarding the 12-month outlook for nearly six years.

“Construction companies again linked uncertainty to Brexit negotiations, which influenced delays to final decisions at clients.

“Moreover, the higher total activity figure reflected the civil engineering sector, which saw a rebound following declines in August and September.

“Housing and commercial construction activity both rose more slowly in October, and at rates that remained below long-run survey averages.

“More positively, construction firms continued to raise headcounts at a strong pace, suggesting they are not expecting an imminent contraction in demand.

“That said, if the new orders and expectations indices remain at current levels or fall further, the employment index could also drift back towards the 50.0 no-change mark.”

Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply added: “On the surface, the construction sector showed growth but there was plenty for businesses to be concerned about underneath.

“Optimism was at its lowest level for six years, as the sector remained stifled by client hesitation, fears about the health of the UK economy and continued Brexit uncertainty, resulting in slower growth of new orders and purchasing.

“However, job creation bucked this downward trend with one of the highest levels of hiring in the last three years and civil engineering experienced a slight reprieve after a few disappointing months.

“The slowdown in the housing sector as the main driver of recent growth was unsurprising given the poor performance in UK house sales.

“These results point to the sector getting stuck in the mud as we approach March 2019, and with ongoing supplier delays and stock shortages, the sector may not be able to respond quickly enough anyway should there by a sudden upturn in fortunes.”

from Construction Enquirer http://www.constructionenquirer.com/2018/11/02/civils-work-pushes-up-industry-activity-but-brexit-casts-a-gloomy-shadow/

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