UK construction growth at its weakest in six months

Housing activity slowed to a pre-April growth rate
Housing activity slowed to a pre-April growth rate

The UK construction sector suffered its weakest growth for six months in September as the “Brexit blot on the landscape” held back activity, according to a report.

The closely-watched Markit/CIPS UK Construction purchasing managers’ index (PMI) showed a weaker-than-expected reading of 52.1 in September down from 52.9 in August, with house building losing momentum.

A reading above 50 indicates growth, but economists had expected the reading to remain at 52.9 according to consensus figures from Pantheon Macroeconomics.

The report said the September data indicated the sector continues to be in a “downbeat mood”, with business optimism at its second lowest level since the beginning of 2013.

This comes despite the figures showing the biggest rise in new orders since December 2016.

“The Brexit blot on the landscape was still in evidence as housing activity slowed to a pre-April growth rate and clients hesitated to place orders,” said Duncan Brock, group director at the Chartered Institute of Procurement & Supply (CIPS).

Civil engineering was the worst-performing sector, as activity declined at a faster rate. A lack of new work to replace completed projects was blamed, after a summer uplift caused in large part by work delayed earlier in the year.

Mr Brock added: “This tale of feast and famine offers little in the way of reassurance and is more about holding on to stable growth than a sprint to the finish.

“The weakest overall activity in six months shows that caution and Brexit concern remain roadblocks to strong growth.”

The slower growth in house building comes as Nationwide Building Society also released data on Tuesday showing property prices edged up just 0.3% month-on-month in September.

Howard Archer, chief economic adviser at EY ITEM Club, said the weaker housing market could continue to act as a drag on construction.

“There is the risk that house building activity could be pressurised by extended lacklustre housing market activity and subdued prices amid challenging fundamentals,” he said.

The PMI survey of firms showed that optimism for the year ahead declined in September.

Construction companies cited political and investor concerns about Brexit as a factor in lower confidence.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said this was supported by official data which has indicated a decline in new orders and housing starts in the second quarter.

“Accordingly, we doubt that the construction sector will make a positive contribution to GDP (gross domestic product) growth over the next few quarters,” he said.