'Downhill course' for construction sector continues ahead of election

Oscar Williams-Grut
Senior City Correspondent, Yahoo Finance UK
Labour leader Jeremy Corbyn lays a brick during a visit to West Nottinghamshire College Construction Centre on 25 November in Nottingham, England. Photo: Leon Neal/Getty Images

The UK’s construction sector continued to shrink in November, according to a closely watched private sector survey published Tuesday.

IHS Markit and the Chartered Institute of Procurement and Supply (CIPS)’s construction purchasing managers index (PMI) for November registered at 45.3. Economists had been forecasting a reading of 44.5.

PMIs measure planning among businesses and are closely watched as a sign of business activity. The readings register on a scale of 1 to 100, with anything above 50 signalling growth in activity and anything below signalling contraction.

While November’s PMI marked an improvement from the 44.2 recorded in October and came in above forecasts, the result means the sector is continuing to contract.

“UK construction output fell again in November as Brexit uncertainty and the forthcoming general election continued to send a chill breeze across the sector,” Tim Moore, economics associate director at IHS Markit, said.

“The speed of the downturn in construction work eased a little since October, but the survey continues to signal a notable drop-off in business conditions compared with the first half of 2019.”

Staffing levels in the construction sector declined for the eighth month in a row and the survey recorded a sharp drop in new work.

“Construction firms have not seen dwindling new orders for this length of time since 2013, as clients continued to defer spending large and small, citing political indecision as the cause of their non-committal,” Duncan Brock, group director at CIPS, said.

“The sector’s downhill course, even with a slight uplift in the figures this month, looks set and there’s no sign construction can dig itself out just yet.”

Tuesday’s PMIs added to a bleak picture for the UK economy ahead of next week’s general election. Manufacturing sector PMIs, published Monday, recorded the seventh straight month of contracting activity and the steepest decline in jobs in the sector for seven years.

Service sector PMIs will be pushed on Wednesday, completing the set. The service sector — which covers everything from banking to coffee shops — is by far the most important, accounting for 80% of economic output last year.