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Slowest decline in construction output since July

Total Activity Index

Latest survey from IHS Markit/CIPS signals slowest drop in overall UK construction output for four months

UK construction companies recorded another drop in business activity during November, although the pace of decline moderated to its slowest since July 2019, according to the latest survey from IHS Markit/CIPS.

At the same time, new work continued to fall sharply amid reports that domestic political uncertainty had led to indecision among clients.

The headline seasonally adjusted IHS Markit/CIPS UK Construction Total Activity Index rose to 45.3 in November, from 44.2 in October, signalling the slowest drop in overall construction output for four months.

Reduced business activity in November was attributed to a lack of new work to replace completed contracts, whilst in some cases, survey respondents suggested that unusually wet weather during the month had also weighed on output.

All three broad areas of construction work recorded a fall in output in November, with civil engineering the worst-performing category, followed by commercial building, while a much slower decline in housing activity helped to moderate the overall drop in UK construction.

The latest data also pointed to another sharp reduction in new work received across the sector. Lower sales volumes have now been recorded for eight consecutive months, which is the longest phase of decline since 2012-13.

Survey respondents commented on subdued client confidence and ongoing hesitancy to commit to new projects, largely in response to domestic political uncertainty.

Looking ahead, construction companies remain relatively cautious about their prospects for growth over the course of 2020. The degree of business optimism was little changed since October and still much weaker than the long-run average.

Reports from survey respondents suggested that this largely reflected concerns about the domestic economic outlook and worries that political uncertainty will continue to hold back client confidence.

Tim Moore, economics associate director at IHS Markit, which compiles the survey, said: ‘UK construction output fell again in November as Brexit uncertainty and the forthcoming General Election continued to send a chill breeze across the sector.

‘The speed of the downturn in construction work eased a little since October, but the survey continues to signal a notable drop-off in business conditions compared with the first half of 2019.

‘Greater hesitancy among clients led to a decline in overall new work for the eighth consecutive month during November, with construction companies reporting a particularly sharp fall in demand for commercial projects amid a greater squeeze from domestic political uncertainty and delayed investment decisions.

‘House building has been the most resilient category of construction output in 2019, but it remains a concern that overall volumes of residential building work have dropped in each month since June, which is the longest phase of decline since the start of 2013.

‘Greater spending on transportation and energy projects had also been expected to help boost infrastructure work this year and next, but survey respondents indicated a sustained soft patch for overall civil engineering activity in November.

‘Some construction companies reaffirmed their concern about the delivery of road and rail projects, with delays to contract awards acting as an additional headwind to growth projections for 2020.’

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