Construction still in doldrums despite rise in output last month

UK construction activity last month beat economists’ expectations but the industry still remains under pressure as weak confidence and political uncertainty take their toll on demand.

The Markit/cips UK construction purchasing managers’ index (PMI) rose to 51.4 last month, up from January’s four-month low of 50.2, with economists expecting a figure of 50.5.

A reading above 50 indicates growth.

Despite the rise, activity continued to be below 2017’s average of 52.3 as the amount of new work brought in by firms dropped for the second month in a row and confidence among construction companies was at one of the lowest levels seen in the past five years.

The update came after the manufacturing industry drifted to an eight-month low in February, with a jump in new orders failing to counter a slowdown in production.

IHS Markit associate director Tim Moore said that “despite pockets of resilience” there was little to suggest that growth would pick up speed.

“The construction sector endured another difficult month during February, with fragile business confidence, entrenched political uncertaintyandsofterhousingmarket conditions all factors keeping growth in the slow lane,” he said.

“Residential work appears on track to experience its weakest quarter since Q3 2016, suggesting that housebuilding is losing its status as the main engine of construction growth.

“Civil engineering activity was the worst-performing category in February, with survey respondents again commenting on a shallow pool of work to replace projects reaching completion.”

Housebuilding struggled, putting it on track for its weakest three-month performance since the third quarter of 2016. Cost pressures also hampered firms due to higher fuel costs and wages.

However, commercial construction reported its fastest rate of expansion for ten months.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “The nearterm outlook for the construction sector remains bleak. Hopes that a Brexit transition deal could be agreed by the end of this month now look forlorn, so businesses will remain reluctant to commit to long-term capital expenditure.”

Thelatestpmisurveyfollows official figures last week showing slower economic growth than previously thought in the final three months of 2017.