Growth Slows, But 'Outlook Still Strong' For Sector

The UK's construction industry grew at the lowest rate in five months during October, the latest Markit/CIPS construction purchasing managers' index (PMI) has shown – although construction managers remain upbeat about growth prospects for the future.

The PMI fell from 64.2 in September to 61.4 in October, a steeper decline than a Reuters poll had forecasted. However, it also marks 18 months of the index remaining above the 50 threshold, denoting positive growth for a year and a half: the longest sustained period since the financial crisis.

Tim Moore, an economist at Markitt, said October’s figures are evidence that the cooling housing market is beginning to impact the residential building sector.

"House building activity still increased at a strong pace overall, but the sharp growth slowdown since this summer reflects greater caution towards new development projects amid tighter mortgage lending conditions and renewed uncertainties about the demand outlook," he said.

Markitt said the overall outlook for construction firms was strong in October, with only a modest slowdown in commercial and civil engineering work and a rise in investment spending.

Expert Opinion

While the growth seen across October may be the lowest in the past five months, it is important to note that the index remains well above threshold and managers remain upbeat about what the future holds for the construction industry. <br/> <br/>"The past 18 months have proven very positive for the sector and, with housebuilding activity remaining strong despite the slowing of the rate growth, it will be interesting to see how matters develop across the next year and a half. <br/> <br/>"Anecdotally at least, the statistics seem to contradict what we are hearing from our network, who are telling us about skills gaps, shortages of labour and shortages of materials such as a lack of bricks and bricklayers caused by an upturn in residential development and house-builders ramping up their efforts to get sites to market. <br/> <br/>"When this is borne in mind there is potential for market uncertainty and we recommend that extra care is taken when entering into contracts and when problems start to arise on projects. A little investment upfront in legal and professional advice can often pay dividends later as it usually helps to avoid the escalation of difficult, time consuming and potentially costly issues. <br/> <br/>"We are told by clients that do make that investment that it can enable them to focus more on building their business and putting their energy into new opportunities instead of resolving historic issues."