Housebuilding drops to three-year low as outlook appears uncertain

News Article

Housebuilding slowed to a three-year low in March, with uncertainty surrounding Brexit appearing to play a part.

Output across the construction industry grew at a "subdued" pace, according to Markit’s latest survey of the sector, whilst new orders showed the weakest rise since early 2015, when nerves ahead of the general election put the brakes on the sector.

Faster increases in commercial work and civil engineering activity in March helped to offset a slowdown in housebuilding, which grew at the slowest pace since January 2013. Job creation also softened, as the uncertain outlook meant companies were more cautious about hiring.

The Markit/CIPS construction PMI (purchasing managers’ index) stood at 54.2 in March, unchanged from February.

While this was well above the 50 mark that divides growth from contraction, Tim Moore, senior economist at Markit, said the sector was "experiencing its weakest growth phase since the summer of 2013".

While Markit did not mention June’s EU referendum directly, Mr Moore said: "Heightened uncertainty about the business outlook appears to have weighed on overall construction demand so far in 2016, with survey respondents citing cautious spending patterns and a reduced willingness to commit to new projects."

More than half of UK construction companies expect business activity to rise over the next 12 months, Markit said, but the overall degree of confidence was the joint lowest since December 2014.

Adam Davis, a Palmers partner who specialises in construction and engineering law, said: “These latest statistics suggest that the construction industry continues to be fragile. Back in January, figures appeared to show the housebuilding sector was buoyant.

“The industry is continuing to struggle to cope with the many variables it is reliant upon, including materials, skilled workers and planning consent, as well as factors outside its control, such as economic confidence. The Markit report does however provide some positive news, with more than half of construction companies expecting business to increase in the year ahead, which suggests the opportunities are out there for the sector to take full advantage of.”

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