UK construction ‘flat as a pancake’ in February

New orders fell for the second month in a row

Ben Chu
Economics Editor
@Benchu_
Friday 02 March 2018 10:48
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‘The near-term outlook for the construction sector remains bleak,’ says economist Samuel Tombs, because no Brexit transition deal has been agreed
‘The near-term outlook for the construction sector remains bleak,’ says economist Samuel Tombs, because no Brexit transition deal has been agreed

The UK construction industry was “flat as a pancake” in February as the sector’s recession dragged on into 2018, according to the latest survey snapshot.

The Purchasing Managers’ Index for builders rose to 51.4 in the month, up from 50.2 in January.

That was above the 50 point that separates growth from contraction, but remains short of 2017’s average 52.3, as the amount of new work hauled in by firms dropped.

“The sector was feeling as flat as a pancake in February with falls in new orders for the second month in a row, and with just a marginal rise in overall activity, as ongoing political and economic uncertainty shouldered the blame,” said Duncan Brock of the Chartered Institute of Procurement & Supply.

Civil engineering activity contracted at its sharpest pace for five months, according to the latest survey.

Housebuilding was also weak again, putting it on track for its weakest three-month performance since the third quarter of 2016.

Cost pressures also hampered firms due to higher fuel costs, pricier raw materials and rising staff wages.

However, there was a bounce back for commercial construction, which expanded at the fastest rate since May 2017.

The Office for National Statistics estimates that aggregate construction output fell over the final three quarters of 2017, putting the sector, which accounts for around 6 per cent of GDP, in recession.

There was a drop in output of 0.7 per cent in the three months to December.

“The near-term outlook for the construction sector remains bleak,” said Samuel Tombs, chief UK economist at Pantheon.

“Hopes that a Brexit transition deal could be agreed by the end of this month now look forlorn, so businesses will remain reluctant to commit to long-term capital expenditure. Rising mortgage rates will subdue demand for new houses. Meanwhile, public sector investment is set to fall in 2018-19.”

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