According to the monthly Markit/CIPS UK construction purchasing managers’ index (PMI), which was released on Tuesday (4 August), the construction sector witnessed a growth rate of 57.1 in July, down from the four-month high of 58.1 in June. It was also below the estimated 58.4 from a Reuters poll, although with any figure above 50 signifying growth, it still shows the industry is performing well.
Moreover, UK construction companies are highly upbeat about their growth prospects over the next 12 months, with more than half (55 per cent) expecting an increase in business activity and only four per cent forecasting a reduction.
The reasons for the slow-down in growth is unclear, but it is suggested that it might be linked to the calming of enthusiasm that was generated when the Conservatives recorded a majority victory in May's General Election.
Another factor highlighted was in housebuilding activity, which increased at its slowest pace since April. June's housebuilding growth figures were, in fact, one of the weakest expansions since mid-2013 and Markit states that it underlines the issue that the UK is going to face in addressing its housing shortage.
However, commercial projects helped to bolster the performance of the sector as whole, with activity rising at the fastest rate since March. Companies also said that an influx of new work, coupled with recommencing delayed projects, had provided a shot in the arm for their business.
Tim Moore, Markit senior economist, commented: “Commercial activity was a key growth driver during July, which partly offset ongoing weakness in civil engineering and softer residential building trends.
“Survey respondents commented on a variety of growth constraints afflicting the residential building sector, including long lead-in times for new projects, scarce supplier capacity, skill shortages and stretched subcontractor availability.”