An overview of the UK economy and construction industry.
Figures for September show difficulties for the UK construction sector, as a drop in new work produced the first reduction in overall business activity since August 2016. An IHS Markit/CIPS survey revealed that the drop in workloads is due to fragile confidence and subdued risk appetite among clients, especially in the commercial building sector.
The seasonally adjusted IHS Markit/CIPS UK Construction Purchasing Managers’ Index (PMI) registered 48.1 in September, below the 50.0 no change threshold for the first time in 13 months. This signalled the fastest decline in overall construction output since July 2016. There were marked falls in both commercial and civil engineering activity during September. The reduction in civil engineering work was the steepest for almost four-and-a-half years.
The decline in work on commercial development projects was the second sharpest since February 2013 (exceeded only by the post-EU referendum dip seen last July).
House building was the only broad area of construction activity to register an expansion in September. However, it still saw a six month low.
During September, the Bank of England kept interest rates at 0.25% but suggested an interest rate rise from November. Bank of England Governor, Mark Carney, said, he and the Monetary Policy Committee were ‘beginning to shift’ on rates.
Meanwhile, Britain’s economic growth looks set to show little sign of improvement in the third quarter, despite a slight bounce-back in the dominant services sector last month. Figures from the IHS Markit/CIPS PMI point to gross domestic product increasing by 0.3% in the July-September period, the same pace as that seen earlier in the year. It is predicted that the fourth quarter will show slower growth.