UK construction weakens as job cuts continue

UK construction growth suffered a surprise slowdown in August as the sector continued to cut jobs, a survey showed.

The IHS Markit/CIPS purchasing managers' index fell to 54.6 from 58.1 in July because of a lack of new orders. On average analysts had expected the reading to improve to 58.5 with 50 marking the difference between contraction and growth.

All three categories of construction weakened in August, which was the worst month for three months. Housebuilding was the strongest category on 60.7 with commercial building on 52.5 and civil engineering registering a decline on 46.6.

Total new business volumes increased for the third month running after Covid-19 restrictions on the industry were eased but the rate of expansion was weak and slowed from July. Construction companies said economic uncertainty had delayed projects, limiting new work.

The rate of job cuts eased only slightly from July and was close to the fastest pace over the past decade. Business expectations improved on hopes of public sector construction spending and infrastructure projects.

Tim Moore, economics director at IHS Markit, said: “The latest PMI data signalled a setback for the UK construction sector as the speed of recovery lost momentum for the first time since the reopening phase began in May. The main reason for the slowdown in total construction output growth was a reduced degree of catch-up on delayed projects and subsequent shortages of new work to replace completed contracts in August."

The survey followed PMIs for manufacturing and services that also showed job losses increasing as the government prepares to withdraw its job support scheme at the end of October. Economists have warned that Chancellor Rishi Sunak risks sacrificing the economy's tentative recovery if mass unemployment hits the UK.

Moore said: “Another month of widespread job shedding highlighted the ongoing difficulties faced by UK construction companies, with order books often depleted due to a slump in demand from sectors of the economy that have experienced the greatest impact from the pandemic."