UK construction sector remains confident in the face of market slowdown

The UK construction sector received disappointing results for March 2017 as residential building growth slowed.

The latest Markit/CIPS UK Construction Purchasing Managers’ Index (PMI) posted at 52.2 in March 2017, dropping from February’s 52.5. This represents one of the slowest levels of growth in construction output since August 2016, before the significant period of growth we have seen for the last six months began.

Like other areas of UK industry, the pace of growth in the construction sector has slowed, but it is refreshing to see that industry confidence remains strong when considering long-term business prospects,” comments David Johnson, Director at currency specialists, Halo Financial.

Housing activity loses momentum

The latest figures reflect only a small increase in new residential building, which has had knock-on effects on jobs growth and led to weaker input buying.

Commercial building and civil engineering on the up

Balancing the residential slowdown, the last month shows a significant increase in civil engineering activity, the fastest growth in 2017 to date; as well as an upturn in commercial construction activity.

Confidence remains high

Construction companies surveyed said they were less concerned about Brexit – and this has improved new business in the form of new invitations to tender. This has increased overall business confidence and points to a positive outlook for growth in the sector. Around half of companies anticipate business growth throughout 2017, with only nine percent expecting growth to slow in their business.

David Johnson from Halo Financial commented, “It is reassuring to see that construction companies are less worried about the effects of Brexit and are focused on longer-term planning to support growth and profitability. This is reinforcing the reason for Sterling’s strength in the face of what could be a very uncertain time.”

Employment increasing

Jobs growth has increased in March 2017, although at a slower pace than previous months, posting a three-month low in employment number growth.

Global pricing pressures have a ripple effect

Suppliers in the sector are feeling the pressure in the face of volatile exchange rates and rising commodity prices, which have led to some materials shortages and lower stocks.