Tuesday 04 September 2018 10:12 am

Construction sector faces renewed slowdown in August as infrastructure projects lag

Activity in the British construction sector slowed in August as housebuilders and civil engineering firms held back from projects, according to a bellwether survey of the industry.

Expansion in the sector waned to a three-month low, with IHS Markit's purchasing managers' index (PMI) today retreating to a reading of 52.9 points, from a strong 14-month peak in July of 55.8.

While the reading remained above the 50 mark which indicates the sector is still growing, it came in well below the 55 reading expected by economists.

The expansion was the weakest since March, with reports that "Brexit-related uncertainty continued to hold back investment spending", the report said.

"Cracks in the construction sector’s masonry" are beginning to show, according to Duncan Brock, group director at the Chartered Institute of Procurement and Supply, which sponsors the survey of more than 170 large firms.

A dearth of larger infrastructure projects pushed the civil engineering sector into contractionary territory for the first time in five months.

"Levels of new work held moderately steady overall, but with any significant growth held back by Brexit uncertainty," said Brock.

However, Max Jones, global corporates relationship director for construction at Lloyds Bank Commercial Banking, cautioned that a fairly healthy pipeline of large infrastructure projects will give some support to builders – despite last week's announcement that Crossrail is behind schedule.

"Mega-projects like Heathrow, Hinkley Point and HS2 continue to offer quality work for firms right down the supply chain," he said.

Employment growth in the sector continued, remaining near its 30-month high hit in July, indicating that skills shortages may also be holding back activity.

Low stock levels were also reported to have impacted delivery times for construction products and materials, another dampener on supply. Indeed, supplier performance deteriorated at the worst pace in almost three-and-a-half years.