Construction output falls at slowest pace since May 2019

January data pointed to a much slower decline in UK construction output than that seen at the end of 2019.

According to the IHS Markit/CIPS UK Construction Total Activity Index, new business volumes were also close to stabilisation, which contrasted with the sharp falls seen in the final quarter of last year. Survey respondents widely commented on a boost to client demand from receding political uncertainty.

Looking ahead, construction companies are now the most optimistic about their growth prospects since April 2018. A number of firms noted that clients’ willingness to spend had picked up after the general election, which should translate into rising workloads over the course of 2020.

The headline seasonally adjusted index rebounded from 44.4 in December to 48.4 in January. The latest reading was still below the 50.0 no-change threshold, but signalled the slowest fall in overall construction output for eight months.

House building was the best performing broad area of construction activity, with output falling only slightly in January. Mirroring the overall construction output trend, residential work fell at the slowest pace since May 2019.

Commercial activity decreased for the 13th consecutive month in January, but the rate of contraction was much weaker than in December and the softest since the start of 2019. A number of survey respondents noted that reduced domestic political uncertainty had the potential to unlock new projects and provide an additional boost to client spending.

Brian Berry, chief executive of the Federation of Master Buiders, said: “Construction is recovering from last year’s instability as we go into the new decade. It’s essential that industry uses this opportunity to commit to training and upskilling. FMB research shows that more than half of builders can’t hire bricklayers and carpenters. Site managers are also in short supply.

“With entry-level construction apprenticeship starts on the decline, as well as starts for young people, the government must make a commitment to supporting small businesses who do most of the training.”