Pace of UK construction slows more than expected

The pace of UK construction slowed more than expected in May, with new orders down for the first time since April 2013 as many firms held off on placing orders until after the EU referendum, according to data released on Thursday.

The Markit/CIPS UK construction purchasing managers’ index fell to 51.2 from 52.0 in April, missing expectations for a reading of 51.9.

The latest reading signalled the weakest overall rise in business activity for almost three years. All three broad areas of construction activity were stuck in a low gear in May.

Residential building work increased at one of the weakest rates seen since early 2013, while growth of commercial activity was the slowest for nearly three years.

Meanwhile, civil engineering stagnated in May, making it the worst performing sub-category of activity for the second month in a row.

Tim Moore, senior economist at Markit, said: “Construction companies are facing a challenging second quarter of 2016, with growth headwinds apparent across all three key areas of activity. May data signalled the worst month for commercial building since June 2013, while residential work and civil engineering activity both saw a renewed loss of momentum.

“Survey respondents noted that the forthcoming EU referendum has disrupted new order flows and the timing of client decision making in particular. Heightened uncertainty and subdued general economic conditions in turn contributed to the first outright fall in new work received by construction firms for just over three years.”

Howard Archer, chief UK and European economist at IHS Global Insight, said this was “a disappointing survey on most counts, adding to a recent stream of weakened news on the construction sector”.

“Not only did the purchasing managers indicate that construction activity was the weakest since June 2013 in May with output only creeping up, but the survey indicated that activity would remain muted in the near term at least as new orders contracted for the first time since April 2013.”