British construction growth sags to six-month low

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Hinkley Point C Nuclear Power Station Continues At Pace
Large energy projects such as the Hinkley Point nuclear generator are expected to be the main drivers of future growth (Source: Getty)

Output growth from the British construction sector sagged to its lowest level in six months in September as civil engineering projects stalled, according to a closely followed indicator.

The construction purchasing managers' index (PMI) fell to 52.1 points in September, down from 52.9 in August, according to data firm IHS Markit.

Civil engineering output, such as road building, fell below the 50-point mark denoting a contraction, with a lack of new orders, the survey of 170 large construction firms found.

Although house building and commercial construction increased at a "solid pace", momentum still slowed. Growth in housebuilding activity has slowed to its slowest since before April.

Yet the rate of new order growth increased to its strongest since December 2016, thanks to "resilient demand and an upturn in new invitations to tender", the poll found.

The construction industry has experienced a bumpy year, with the high-profile failure of Carillion at the start of the year and volatile output thanks to extreme weather.

Firms' outlooks on the year ahead were the worst reported since February 2013, with respondents noting political uncertainty and the approach to Brexit as negative factors for their confidence.

Tim Moore, associate director at IHS Markit, said the survey showed "mixed signals" for future months, with a divergence between new order growth and overall confidence.

"The main areas reported as likely to see a boost in the coming year were construction work related to large-scale energy and transport projects,” he said.

Max Jones, a global corporates relationship director at Lloyds Bank Commercial Banking, said he had seen evidence that firms are holding steady on pricing, but added that risks around commercial building in particular are heightened.

He said: "Many contractors are betting big on infrastructure, yet there is only so much work to go round. And with some questioning the merit of the current pipeline of mega-projects, it underlines that there is no risk-free part of the market in which to be invested.”

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