Construction momentum slows down in December
● Housebuilding healthy but office work declines ● Civil engineering stagnant and outlook subdued
UK construction showed a contrasting picture at the end of 2017, with a strong rise in housebuilding offset by declining work on offices and factories and stagnating civil engineering output.
Theihsmarkit/cipsukconstruction Purchasing Managers’ Index out yesterday posted 52.2 in December, which was down from 53.1 in November but above the 50 no-change threshold for the third consecutive month.
The report said “positive signals” included overall new order growth touching a seven-month high and job creation the strongest since June. “However, intense supply chain pressures continued across the construction sector while input cost inflation picked up from November’s 14-month low,” the report said.
Tim Moore, associate director of IHS Markit, said: “The UK construction sector achieved a moderate expansion of business activity at the end of 2017, although the recovery remained uneven and slowed overall since November.
“Construction companies indicated that another strong contribution from housebuilding helped to offset subdued civil engineering activity and reduced volumes of commercial work.”
Moore said confidence in the sector remained muted, largely reflecting concerns about the faltering UK economy. He added: “Exactly 37 per cent of the survey panel forecast a rise in construction activity over the course of 2018, while around 11 per cent anticipate a reduction.
“As a result, the balance of UK construction companies expecting growth in the year ahead remains among the weakest recorded by the survey since mid-2013.”
Howard Archer, chief economic adviser to the EY Item Club, said the latest data showed that, despite “modest” expansion in December and the final quarter of last year, the construction industry “found life very challenging” in Q4.
That followed 0.5 per cent contraction in output quarteron-quarter in Q3 and 0.3 per cent contraction in Q2 – the two consecutive quarters of falling output that is the technical definition of a recession.
Archer said: “The struggles of the construction sector in recent months has been influenced by heightened economic, political and Brexit uncertainties fuelling companies’ caution over committing to new projects.
“Relatively weak economic activity has also weighed down on construction activity.” Britain’s financial watchdog has opened an investigation into infrastructure giant Carillion as the troubled firm’s woes continue. The company, which is embroiled in a crisis that has involved a string of profits warnings, said the Financial Conduct Authority is probing the “timeliness and content” of announcements made between 7 December, 2016, and 10 July, 2017. The firm’s Scottish work includes a contract to extend platforms at Edinburgh Waverley station, above.