UK construction market slows

The UK construction sector has slowed to its lowest level of output for 17 months, according to latest figures.

Results from the Markit/CIPS purchase managers’ index showed that while there were encouraging signs within homebuilding and commercial development markets, demand for civil engineering projects weakened during December.

Rates of growth in terms of new construction orders slowed for the sixth successive month, though firms’ workloads were said to be “robust” and had resulted in staff recruitment volumes increasing towards the end of 2014.

The PMI growth survey showed an overall index rating of 57.6 - down from 59.4 in November, which is still above the benchmark of rating of 50 that indicates sector expansion.

This was also reflected in the fact that more than half the companies surveyed (52%) were optimistic of a rise in business activity during 2015, while 13% forecast a reduction.

Tim Moore, senior economist at Markit, said construction companies “remained upbeat” about the prospects for 2015, after recording solid overall results for 2014.

He said, “UK construction output growth retreated further in December, but another strong expansion of house building activity ensured that the sector continued to perform impressively overall. Indeed, over the course of 2014, UK construction firms recorded the strongest calendar year of residential building since the survey began in 1997.

“A sharp recovery in house building, as well as resurgent demand for commercial development projects, continued to boost staff recruitment and sub-contractor pay rates across the construction sector in December.”

Chris Temple, engineering and construction leader at Price Waterhouse Coopers, described the results as a “short seasonal blip.”

The construction expert explained the outlook for 2015 remained positive, with residential property being at the forefront of growth within the sector.

Temple said, “The healthy order books reported by construction firms reflect the confident growth outlook within the sector and certainly, among our clients, most expect to see growth in 2015 of at least 3%.

“The order books also give contractors and subcontractors a late Christmas present as they support a potential easing of pressures on their margins in the medium term.

“The robust outlook also supports potential job creation right across the industry in 2015, especially in the skilled trades.”