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IHS Markit: Construction sector continues slowdown

September data revealed another growth slowdown in the construction sector, with output volumes rising to the smallest extent for eight months, according to the IHS Markit / CIPS UK Construction PMI.

 

At 52.6 in September, down from 55.2 in August, the headline seasonally adjusted figure dropped further below the 24-year high seen in June (66.3).

All three broad categories of construction activity saw a loss of momentum in September, with the biggest slowdown seen in civil engineering (51.0, down from 54.8 in August).

House building also decelerated in September, with the latest expansion the weakest since the recovery began in June 2020 (52.8).

This left the commercial segment (53.6) as the best performing category during September.

Meanwhile, the latest survey illustrated that construction firms remained highly upbeat about the business outlook.

Just over half (51%) forecast rising output, while only 8% anticipate a decline.

Tim Moore, director at IHS Markit, said: “September data highlighted a severe loss of momentum for the construction sector as labour shortages and the supply chain crisis combined to disrupt activity on site.

“The volatile price and supply environment has started to hinder new business intakes as construction companies revised cost projections and some clients delayed decisions on contract awards.

“As a result, the latest survey data pointed to the worst month for order books since January’s lockdown.

“Shortages of building materials and a lack of transport capacity led to another rapid increase in purchase prices during September.

“There was also a considerable decline in the availability of sub-contractors, with survey respondents citing shortages of bricklayers, drivers, groundworkers, joiners, plumbers and many other skilled trades.

“Measured overall, prices charged by sub-contractors increased at the fastest rate since the survey began in April 1997.”

Fraser Johns, finance director at Beard, added: “Today’s stats show the construction sector is still being significantly hampered by labour shortages and supply chain issues.

“With output volumes rising by the smallest extent for eight months, and a rapid drop in sub-contractor availability, strong relations with suppliers have never been more critical.

“To build these relationships and to reassure clients, contractors need to ensure prompt payment and regular collaboration with suppliers is fundamental to all projects.

“Inflationary price pressures and supply shortages continue to hinder new business, with clients re-considering decisions in the current environment.

“This may continue until such pressures begin to ease, a time period which is still unclear.”

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