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Construction output growth slows to lowest rate for three years, reports Markit / CIPS Construction PMI

Growth in construction activity in April slowed to its lowest rate for nearly three years, according to this month’s Markit / CIPS Construction PMI.

April’s index level of 52.0 was still above the 50.0 ‘no change’ level, suggesting that construction activity is still growing, but April’s reading was down from 54.2 in March and was the lowest level of growth recorded since June 2013.

Commercial building was the strongest performing sector, but even its growth was still the slowest since July 2013. Residential construction rebounded only slightly from the 38-month low recorded in March, while civil engineering grew at its slowest pace so far this year.

Similarly, new business volumes hit their lowest rate of growth since April 2013, with construction firms citing an unwillingness from clients to commit to new projects, alongside concerns over the UK’s economic outlook.

Business sentiment also sank to one its lowest levels for nearly three years, largely due to stagnating new business volumes and a lack of new invitations to tender.

Staffing levels continued to increase across construction in April, but there was only a modest increase compared with recent months, suggesting a more cautious approach to hiring new staff. This contributed to an increase in subcontractor usage last month.

Elsewhere, cost inflation picked up to hit its fastest level recorded since July 2015.

Commenting on the data, Scape Group chief executive Mark Robinson said that “uncertainty around the economic outlook is creating an unwillingness to commit to new projects and major spending decisions”.

“However, looking at the longer term, conditions in the construction sector are likely to change in the second half of this year after the EU referendum in June as companies begin to make more informed and confident decisions,” he added.

Earlier in April, the Office for National Statistics published a comparison of its statistics and data from Markit, which suggested that more needed to be done to improve the quality of both datasets.

Mike Chappell, global corporates managing director for construction at Lloyds Bank Commercial Banking, said: “Despite a backdrop of uncertainty in the wider UK trading environment, construction remains relatively stable compared to previous years, despite the drop in this data.

“The past couple of months have seen a number of the sector’s major commercial players report robust results with an upbeat outlook as the sector continues to make progress in improving margins and ensuring order books consist of sustainable work, with troublesome legacy contracts being worked through.”

He added: “The note of caution comes from remembering that construction’s fortunes are tied inexorably to that of the wider UK economy, though the hope is that more certainty in the second half of the year provides a boost to output levels.”

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