Construction firms see drop in business in November

Michael Lloyd

December 3, 2019

Construction companies saw another drop in business activity during November with the pace of decline its slowest since July, the HIS Market Construction PMI has showed.

The headline seasonally adjusted IHS Markit/CIPS UK Construction Total Activity Index rose to 45.3 in November, from 44.2 in October.

Reduced business activity was attributed to a lack of new work to replace completed contracts.

Tim Moore, economics associate director at IHS Markit, added: “UK construction output fell again in November as Brexit uncertainty and the forthcoming General Election continued to send a chill breeze across the sector.

“The speed of the downturn in construction work eased a little since October, but the survey continues to signal a notable drop-off in business conditions compared with the first half of 2019.

“Greater hesitancy among clients led to a decline in overall new work for the eighth consecutive month during November.

“Construction companies reported a particularly sharp fall in demand for commercial projects amid a greater squeeze from domestic political uncertainty and delayed investment decisions.

“House building has been the most resilient category of construction output in 2019.

“However, it remains a concern that overall volumes of residential building work have dropped in each month since June, which is the longest phase of decline since the start of 2013. “

Construction companies commented on subdued client confidence and ongoing hesitancy to commit to new projects, mostly in response to political uncertainty.

Looking ahead, construction firms remain relatively cautious about their prospects for growth over the course of 2020.

Gareth Belsham, director of the national property consultancy and surveyors Naismiths, added: “This is more a case of pragmatism rather than real progress, and truce rather than turnaround.

“The pain is easing, but this is all relative. Investor demand is brittle, new orders continue to decline at an alarming rate and many builders don’t have a sufficient pipeline of work to replace completed projects.

“Yet there are some silver linings. Housebuilding activity battled its way almost to parity with the previous month, and its comparative strength made the overall picture look far rosier than it might have done.

“Coming after official statistics confirmed that the construction industry as a whole rebounded to growth in the third quarter, sentiment is holding relatively steady.

“While no-one expects a rapid uncorking of the UK’s long-repressed demand, a decisive election result this month may at last bring some clarity to the market.

“There is only so long that mothballed projects can be delayed, and while conditions are far from perfect, a steady stream of tactical investors is now sensing that opportunities can outweigh the risks.

“If January confirms the growing sense that the threat of a chaotic no deal has receded, we could see the floodgates open a crack further.”

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