Drop in construction work

Business activity levels fell during February, which ended a ten-month period of sustained expansion, according to the IHS Markit/Cips UK Construction Total Activity Index.

The drop in construction work was led by reductions in commercial building and civil engineering activity. A soft patch for new orders so far in 2019 meant that job creation remained subdued in February. Survey respondents often cited concerns about a lack of new projects to replace completed contracts.

At 49.5 in February, down from 50.6 in January, the headline seasonally adjusted registered below the 50.0 no-change threshold for the first time since the snow disruptions seen in March 2018. Aside from this brief weather-related decline in output, the latest reading was the lowest since September 2017.

Residential work was the best performing area of construction activity in February, with growth recorded for the 13th month running. However, the rate of expansion was only modest and therefore could not offset the declines recorded for commercial and civil engineering activity, the report said. In both cases, the pace of contraction was the steepest since March 2018.

Anecdotal evidence from survey respondents suggested that Brexit uncertainty had slowed decision-making on commercial projects and led to subdued client demand so far this year. There were also reports that low transaction volumes and a general drop in confidence across the housing market had acted as a brake on residential building.

Tim Moore, economics associate director at IHS Markit, said: “On a more positive note, input price inflation held close to January’s two-and-a-half year low. The slowdown
in cost pressures from the peaks seen in the first half of 2018 provides a signal that the worst phase has passed for supplier price hikes related to sterling depreciation.”