UK construction companies indicated a sharp loss of growth momentum in April, with output and new orders expanding at the slowest rates since June 2013.
A number of survey respondents suggested that uncertainty related to the forthcoming General Election had contributed to delays in clients’ spending decisions. However, construction sector job creation remained robust in April and there were widespread reports of worsening capacity pressures.
This contributed to another drop in sub-contractor availability and a corresponding increase in sub-contractor pay rates, with the latest rise the fastest since the survey began in April 1997.
At 54.2, down from 57.8 in March, the headline seasonally adjusted Markit/CIPS UK Construction Purchasing Managers’ Index (PMI) dropped for the second month running and was the lowest for almost two years. However, the index remained above the 50.0 no-change value and signalled a solid overall pace of expansion.
Residential building activity was by far the best performing broad area of construction output during April, although even in this category the pace of expansion slipped to a 22-month low. Meanwhile, growth of commercial construction work was the least marked since August 2013 and civil engineering activity decreased for the first time in four months.
Reports from survey respondents suggested that underlying conditions remained favourable, especially in the house building sector, but some clients had delayed spending decisions ahead of the General Election.
Looking ahead, business confidence regarding the 12-month outlook dipped from the nine-year high seen in March, but remained stronger than its long-run average. A number of firms cited optimism that underlying demand would continue to improve, while others suggested that the removal of election-related uncertainty would help support new business gains. Robust job creation was maintained across the construction sector in April, although the rate of staff hiring was still less marked than the average seen in 2014 as a whole. Increased workforce numbers were linked to rising business investment and efforts to boost operating capacity. Meanwhile, sub-contractor usage moderated slightly in April, but this did not prevent another marked drop in sub-contractor availability. As a result, sub-contractor charges rose sharply, at the fastest pace since the survey began 18 years ago.
April data suggested that the worst phase of the downturn in supplier performance may have passed, as the latest lengthening of supplier lead times was the least marked since June 2013. Moreover, input cost inflation eased sharply to its lowest for just over two years. A number of firms noted that increased stocks at suppliers had helped alleviate some of the strain on materials availability and vendor capacity.
Tim Moore, senior economist at Markit and author of the Markit/CIPS Construction PMI, said: “April’s survey highlights another growth slowdown across the UK construction sector, with new work expanding at the weakest pace for almost two years.
“The uncertain general election outcome appears to have put some grit in the wheels of decision making. Construction firms widely noted delays with clients’ budget setting and a reduced propensity to commit to new projects.
“Despite experiencing pre-election risk aversion among clients in April, construction companies indicated a strong degree of confidence regarding the year-ahead outlook.
“Taken as a whole, the latest survey presents a far more upbeat picture than the curiously weak official construction output data for the first
