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Lack of new projects hits post-election activity

A slowdown in new orders and projects hit construction activity in June, according to the first construction purchasing managers’ index to cover the post-election period.

Respondents to the survey – carried out by the Chartered Institute of Procurement and Supply with research firm Markit – said a lack of new work to replace completed projects dampened activity last month.

Survey respondents also pointed to higher risk aversion from clients, with some said to be delaying decisions due to heightened political uncertainty.

The PMI for June stood at 54.8, above the 50.0 ‘no change’ level but below the reading of 56.0 in May, suggesting the rate of growth has slowed.

Housing remained the strongest sector in terms of activity, with June’s rise in housing work the second fastest since December 2015.

Both commercial and civil engineering work showed a slowdown in growth last month.

Respondents were less optimistic about their outlook for the next 12 months, with the survey’s business optimism rating reaching its lowest point since December 2016.

Construction firms also reported the strongest cost increases for three months, with weaker sterling rates feeding through from product manufacturers.

June’s results stand in contrast to the PMI for May, which saw construction activity reach a 17-month high.

May’s PMI had also noted that commercial activity rose by its fastest rate since March 2016, with respondents pointing to an increased pipeline of new developments.

CIPS director of customer relationships Duncan Brock said: “While new business wins were less in evidence, demand for materials remained high as suppliers scrambled to meet the need for a number of materials in short supply.

“The availability of skilled workers remained an issue, with the slowest rise in employment levels for three months as a lack of new orders translated into restricted levels of hiring.

“With some doubt edging into the psyche of the construction industry [regarding] trading conditions, the sector will be guarding against continuing higher input prices with another eye on the possibility of rising interest rates as well.”

Scape Group chief executive Mark Robinson added the PMI was a reflection of uncertainty following last month’s election.

“We need to once again consider where additional efficiencies can be found, including the ways in which the private and public sectors can work together to save on time and cost, whilst ensuring the highest quality delivery,” he said.

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