Construction activity slows in August as projects are put on ice

The UK construction industry saw growth slow down in August as businesses put projects on ice.

The closely followed IHS Markit/CIPS construction purchasing managers’ index (PMI) hit a reading of 54.6 last month, compared to 58.1 in July.

Any reading above 50 represents an expansion in business activity.

Large scale construction projects were halted as firms remain cautious in the current coronavirus climate.

Duncan Brock, director at the Chartered Institute of Procurement & Supply, said: "The momentum in the sector’s recovery hit a bump in the road in August with a sudden slowdown in output growth and tender opportunities, while employment trends remained the most fragile in a decade.

"This stalled progress was not a surprise given the warning signs last month that any hard-won progress could start to fizzle out. As new order gains slowed across all sectors, continuing COVID-19 anxiety amongst clients meant many projects still remained on ice. Though residential building remained the strongest, it too was showing signs of strain.

"In addition, there were ongoing difficulties in supply chains which hampered the sourcing of raw materials. Delivery times lengthened in August as a result of stock shortages at suppliers and cost increases were the highest since April 2019."

Housing activity drove growth the period, with the housebuilding sector reporting a 60.7 reading, compared to a 52.5 reading for commercial activity and 46.6 reading for civil engineering.

The report revealed that new business volumes increased for the third consecutive month but slowed dramatically from July.

Construction companies said that “economic uncertainty and a wait-and-see approach among clients” had limited opportunities to secure new contracts.

Firms also reported a further decline in staffing numbers over the month, although the rate of job shedding “eased slightly” since July.