Construction growth is at its weakest level for three years, according to the latest figures from the Markit/CIPS UK Construction Purchasing Managers’ Index (PMI).
The index posted a score of 51.2 in May, down from 52.0 in April and only slightly above the critical 50.0 no-change mark. The latest reading signalled the weakest overall rise in business activity for almost three years.
Residential building work increased at one of the weakest rates seen since early-2013, while growth of commercial activity was the slowest for nearly three years. Civil engineering stagnated in May, which made it the worst-performing sub-category of activity for the second month running.
However, there were signs that construction companies remain relatively upbeat about the growth outlook, with more than half of the survey panel (51%) expecting a rise in output over the next 12 months and only one in seven (14%) anticipating a fall. As a result, job creation picked up in May and reached a four-month high. Looking ahead, UK construction firms are upbeat overall about the year ahead, with just over half of the survey panel forecasting a rise in output.
The degree of optimism was up fractionally since April, but still at one of the lowest levels seen over the past three years. Survey respondents linked this to heightened economic uncertainty and concern that softer market conditions will persist into the second half of 2016 (especially in the housing sector).
Tim Moore, senior economist at Markit and author of the PMI, said: “Construction companies are facing a challenging second quarter of 2016, with growth headwinds apparent across all three key areas of activity. May data signalled the worst month for commercial building since June 2013, while residential work and civil engineering activity both saw a renewed loss of momentum.
“The main positive aspect was a pick-up in staff hiring to its fastest since the beginning of the year. Positive employment trends not only contrasted with falling new order volumes in May, but the gap between these indices was the largest since the survey began in 1997.
“An optimistic interpretation is that construction firms are looking through the second quarter weakness and feel that workloads will recover momentum. However, should this fail to materialise later in 2016, then job creation is likely to come under pressure given its elevated trend relative to current demand patterns.”
