MNI: UK Construction Sector Declines Sharply In March

-CIPS/IHS Markit UK Construction PMI 47.0 in March Vs 51.4 Feb

By Jamie Satchithanantham and Jai Lakhani

     LONDON (MNI) - The UK construction sector not only failed to break away

from its soft growth path so far this year but declined to below the 50.0 no

change threshold for the first time in six months, data from the March IHS

Markit/CIPS survey showed.

     The UK Construction Purchasing Managers' Index (PMI) fell sharply from 51.4

in February to 47.0 in March with the report highlighting the bad weather last

month, which contributed to a fall in business activity. 

     According to the report, the overall reduction in construction output was

driven by the sharpest drop in civil engineering work for five years in March

adding to the problems it faced in February. 

     Commercial activity also declined in March with the rate of the decline the

most marked since September 2017. Housing bucked the wider trend for

construction activity in March but the upturn in residential building was

marginal at best. 

     The report also cited anecdotal evidence that the decline in new business

volumes was attributed by respondents to subdued underlying demand and, in some

cases, weather-related disruptions weighing on sales in March. 

     This was combined with the continuation of higher raw material costs

weighing on firms as well as sub-contractor availability declining, leading to

the strongest rise in average prices charged since September 2017. 

     --COST PRESSURES LOWER, STILL WEIGH 

     The cost of key inputs remained relatively expensive in March despite the

overall rate of input cost inflation softening to a 20-year low. In addition to

this, survey respondents noted a moderation in supplier prices linked to the

weak pound and that greater staff wages had pushed up operating expenses. 

     -- WEATHER AFFECTED MARCH BUT SECTOR'S POTENTIAL STILL LOOKS QUESTIONABLE

     The construction PMI findings show a tough month in March where "Total

construction output fell at the fastest pace since July 2016, driven by the

sharpest reduction in civil engineering activity for five years and a renewed

fall in commercial work." said Tim Moore, Associate Director at IHS Markit. 

     He added that the reason for the subdued business conditions in March was

due to snow-related disruption.

     Whilst construction saw a solid rise in employment numbers and a rebound in

business expectations to a nine-month high, the survey respondents also noted

"that underlying demand remains constrained by heightened economic uncertainty

and risk aversion among clients." 

     Duncan Brock, Director of Customer Relationships at the Chartered Institute

of Procurement & Supply, added, "It's a few years since the UK experienced such

bad weather in March and it's obvious that supply chains were woefully

unprepared to deal with the disruption. So though March's figures could be

viewed as a temporary blip, without a strong pipeline of work, and strong risk

strategies in place, the sector's health remains in question."

--MNI London Bureau; +44 203 865 3828; email: jai.lakhani@marketnews.com

--MNI London Bureau; tel: +44 203-586-2223; email: david.robinson@marketnews.com

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