House-building drags UK construction back into growth


May 03, 2019 – A lift in house-building activity saw UK construction output rise in April 2019 for the first time since January.
The latest monthly survey of construction industry purchasing managers reveals the fastest rise in house-building so far in 2019 but commercial work and civil engineering activity continued to decline, albeit more slowly than in March.

Despite overall growth returning, the forward-looking survey indicators remained subdued in April, with new orders falling for the first time since May 2018 and business optimism sagging to its lowest since last October. Concerns about future work resulted in more cautious hiring strategies as evidenced by the first fall in workforce numbers since July 2016.

At 50.5 in April 2019, up from 49.7 in March, the headline seasonally adjusted IHS Markit/CIPS UK Construction Total Activity Index (what used to be called the purchasing managers index) posted above the neutral 50.0 threshold – although only just – for the first time since January 2019. This indicates a small expansion of overall construction output, contrasting 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, the survey indicates, 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.


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