Growth in UK construction sector slows in March

A slowdown in housebuilding dragged down growth in the UK’s construction sector, according to a closely-watched business survey.

IHS Markit’s monthly purchasing managers’ index for the sector produced a headline reading of 52.2. Economists had expected the figure to stay steady at 52.5.

The survey showed a particularly weak rise in residential building activity and only a “marginal” increase in new work, though civil engineering activity rebounded.

The data follows similarly disappointing results from Markit’s manufacturing PMI released yesterday, which also showed an unexpected slowdown.

Respondents were still “relatively upbeat” about their prospects for growth in the coming months, however, with optimism for the year ahead rising to its second-highest level since 2015.

IHS Markit and the Chartered Institute of Procurement and Supply poll businesses across the construction industry – which accounts for around 9 per cent of UK GDP – on measures such as new orders, inventories and hiring to get an overall picture of the health of the sector. A reading above 50 signals expansion during the month.

Tim Moore, IHS Markit senior economist, said:

A weaker trend for residential work has been reported throughout 2017 so far, which provides an indication that the cooling UK housing market has started to act as a drag on the construction sector.

Duncan Brock, CIPS director of customer relationships, added:

Where the housing sector acted as the main engine of growth over the last four years, this month it was slower and stuttering, while overall purchasing activity in the construction sector was disappointingly tame, shackled by a lack of new orders and rising costs.

Now the trigger has been pulled to propel the UK out of the EU, the construction sector must keep an attentive eye on how the UK government’s negotiations will play out and whether consumer and business caution returns to hamper further progress.