Activity up, confidence down

UK construction companies indicated a sustained increase in business activity during October, according to the seasonally adjusted IHS Markit/Cips UK Construction Total Activity Index.

The overall rate of expansion improved slightly since September and was the second-strongest in 16 months. This mainly reflected a rebound in civil engineering activity, however, as both residential and commercial activity increased more slowly.

Less positively, new projects rose only modestly and firms were the least optimistic regarding growth prospects in nearly six years.

The rate of new contract growth was the weakest in the current five-month sequence of expansion. Some firms mentioned intense competition in the market, and delayed final decisions from clients.

Slower new order growth impacted firms’ expectations for future growth, with the business expectations index falling to a near six-year low. Alongside muted new project intakes, firms highlighted uncertainty related to Brexit and the economy as undermining confidence.

Despite the softer rise in inputs being ordered, delivery times for construction products and materials continued to lengthen markedly in October. Firms continued to report stock shortages at vendors.

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. Sub-contractor rates also continued to rise at a relatively strong pace during the month.

Duncan Brock, group director at the Chartered Institute of Procurement and Supply, said: “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.”