Solid upturn in new business

August data pointed to a renewed slowdown in output growth across the UK construction sector, with all three broad categories of activity recording a loss of momentum since the previous month, according to IHS Markit/CIPS UK Construction Purchasing Managers’ Index.

That said, there were signs of resilience in terms of underlying workloads, with the latest survey signalling another solid upturn in new business.

Commercial building was the best performing area of construction output in August, followed closely by residential work. However, the latest expansion of housing activity was the weakest since March.

Latest data revealed a slowdown in new business growth from July’s 14-month peak. Anecdotal evidence cited resilient client demand and supportive economic conditions, but there were also reports that Brexit-related uncertainty continued to hold back investment spending.

Higher overall workloads encouraged additional staff recruitment across the construction sector in August. Survey respondents noted tight labour market conditions and shortages of suitably skilled candidates to fill vacancies.

Purchasing activity increased for the eleventh consecutive month in August, although the latest upturn was the weakest since March. Low stock and labour shortages among suppliers continued to impact on delivery times for construction products and materials. The latest deterioration in supplier performance was the greatest seen for almost three-and-a-half years. Despite stretched supply chains and rising energy-related costs, latest data indicated that input price inflation edged down to its lowest since July 2016.

UK construction companies are optimistic that business activity will expand over the coming 12 months, but the degree of confidence eased to its weakest since May. Survey respondents cited confidence about achieving organic growth through new project wins and geographical diversification, while Brexit uncertainty remained the main factor cited as holding back sentiment.