Growth slows in UK construction industry

Wednesday 9 August 2017

The UK construction industry has seen its growth slow down in the last quarter, a new study has suggested.

Research from Markit/CIPS Purchasing Managers Index (PMI) found that the commercial sector index reading fell below the 50 mark (50 separates expansion from contraction), meaning work volumes are falling.

Besides last year’s post-EU referendum fall, it is the first time commercial activity dropped since 2013. Overall, growth slipped from 54.8 in June to 51.9 in July.

Residential building was the strongest performing sector in July, but its latest rise was the slowest for three months. The only increase in output growth was seen in the civil engineering sector.

Tim Moore, associate director at Markit and author of the PMI, said: “July’s data reveals a growth slowdown in the UK construction sector, mainly driven by lower volumes of commercial development and a loss of momentum for house building.

“Worries about the economic outlook and heightened political uncertainty were key factors contributing to subdued demand.”

July also saw an overall fall in business work volumes for the first time since the industry began its post-referendum recover in September 2016. 

Due to uncertainty surrounding Brexit, companies have adopted more cautious recruitment policies. This is shown in employment growth falling to its slowest speed for 11 months, while subcontractor usage also fell. 

Expenses have also been affected, with inflation on input costs for construction firms staying close to the peaks recorded at the start of 2017. 

Mike Chappell, global corporates managing director for construction at Lloyds Bank Commercial Banking, said the dip in figures is not surprising. 

However, Mr Chappell went on to say that results from commercial show margins are holding up reasonably well. 

He also explained that the awarding of HS2 contracts has helped to ease nervousness in the industry. 

Mr Chappell added that the future focus must be on organic growth and pushing boost margins to above the two per cent mark. 

As Brexit continues to cause uncertainty, the current construction climate could provide plenty of opportunities for talented independent professionals. However, these experts may need contractor and freelancer accountants to assist with financial duties. 

With a wide knowledge of tax rules, these specialists can make sure business people do not break any regulations and maintain their reputation. 

Breaking laws can result in significant fines, which can have a hugely negative impact on startups. 

By Victoria McDonnell

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