April data pointed
to a marginal expansion of UK construction output, driven by the fastest rise
in house building so far in 2019.
Commercial work and
civil engineering activity continued to decline, but at slower rates than in
March.
The forward-looking
survey indicators nonetheless remained subdued in April, with new orders
falling for the first time since May 2018 and business optimism easing to its
lowest since last October.
Concerns about the
demand outlook resulted in more cautious staff hiring strategies in April, as
highlighted by the first fall in workforce numbers since July 2016.
At 50.5 in April, up
from 49.7 in March, the headline seasonally adjusted IHS Markit/CIPS UK
Construction Total Activity Index posted above the neutral 50.0 threshold for
the first time since January.
The latest reading
signalled a modest expansion of overall construction output, which contrasted
with the declines seen in each of the previous two months. House building was
by far the strongest performing area of construction work in April. Latest data
revealed a solid expansion of residential work, with the rate of growth
reaching its highest since December 2018. Survey respondents commented on
resilient demand conditions and a strong flow of new buyers.
Commercial work was
the weakest area of construction output in April, which continued the trend
seen during the first quarter of 2019. A number of firms linked lower
commercial construction to Brexit-related uncertainty and delays with client
spending decisions. Civil engineering activity also decreased in April,
although the rate of contraction was only marginal. Some firms commented on a
lack of new work to replace completed infrastructure projects. Construction
companies indicated a modest decline in total new orders during April. The fall
in new work was the fastest recorded since March 2018.
Anecdotal evidence
suggested that political uncertainty, softer UK economic growth projections and
subdued demand for new commercial projects had all contributed to fewer tender
opportunities. Employment numbers fell slightly during April, which ended more
than two-and-a-half years of sustained expansion. Survey respondents noted that
lower business optimism and falling sales volumes had held back staff hiring.
Meanwhile, supplier
performance deteriorated sharply in April, despite subdued demand for
construction materials. The latest lengthening of vendor lead times was the
greatest recorded since February 2015. Construction companies widely commented
on low stocks and capacity constraints among vendors. Stretched supply chains
and rising raw material prices contributed to higher purchasing costs across
the construction sector.
The rate of input
price inflation accelerated for the third month running and was the fastest
since November 2018. Adding to pressures on operating expenses, latest data
also pointed to a robust and accelerated increase in rates charged by
sub-contractors in April.
Tim Moore,
Associate Director at IHS Markit, which compiles the survey: “A return to
growth would normally be considered a positive month for the UK construction
sector, but the weakness outside of house building gives more than a little
pause for thought.
"Commercial
activity and civil engineering both remained on a downward path in April as
political uncertainty led to delays with spending decisions.
"Residential
work retained its position as the sole driver of growth across the three main
segments of construction activity. Survey respondents once again noted that
residential projects were buoyed by strong demand for new homes, low mortgages
rates and first-time buyer incentives.
"On the supply
side, sub-contractor availability worsened and construction firms continued to
report low stocks among suppliers in April. Latest data revealed the greatest
lengthening of lead times for construction inputs since February 2015, reflecting
ongoing capacity pressures across the supply chain.
"The
forward-looking survey indicators remain subdued, with the UK construction
sector recording a drop in business optimism during April and the largest fall
in new work for over one year.
"A lack of new
work has started to impact on staff recruitment, as signalled by a reduction in
payroll numbers for the first time since July 2016. This provides another
signal that construction firms are bracing for an extended period of soft
demand ahead."
