There are signs that the state of the construction sector could improve over the coming months, despite another sharp reduction in construction activity in December.
That’s according to the IHS Markit/CIPS UK Construction Total Activity Index, which surveys construction buyers. It stood at 44.4 during the month, down from 45.3 in November, where 50.0 indicates no change. The survey attributed the December fall to political uncertainty and subdued client demand.
It made it the eighth consecutive month where the index has scored below the no-change value, making it the longest period of falling business activity across the construction sector for almost a decade.
The survey found that civil engineering was “by far the worst-performing” category of construction, with activity falling at the fastest pace since March 2009, with political indecision identified as the likely culprit.
Commercial work also fell, attributed in part to clients delaying their spending decisions until after the general election. There was also a modest decline in housebuilding.
Meanwhile, the survey found a “marked reduction” in new business volumes during December, although the pace of retraction was less severe than the ten-year record seen in August.
But Tim Moore, economics associate director at IHS Markit, suggested that 2020 could prove brighter: "The forward-looking survey indicators provide some hope that the construction sector malaise will begin to recede in the coming months. Latest data indicated that the downturn in order books remains much less severe than the low point seen last August, which has already helped to bring employment numbers closer to stabilisation.
"Moreover, construction companies signalled that business optimism has recovered to its strongest for nine months. Survey respondents cited confidence that a more predictable domestic political landscape and clarity on Brexit could deliver a much-needed boost to clients’ willingness-to-spend in 2020," he said.
Duncan Brock, group director at the Chartered Institute of Procurement & Supply added: "Construction companies are still struggling to fill the skills gap left by the last recession and have had a bumpy ride since the referendum in 2016. It may take years to salvage the losses of the last three years, even if all obstacles are magically removed from the sector’s path to recovery. Whilst suppliers’ delivery times are on the verge of improving and input price inflation slowed to its lowest level since 2010, this will be cold comfort as the sector continues with one of its worst overall performances in the last ten years."
