Construction Sector Shows Signs of an August Slowdown

The UK’s construction sector saw levels of activity notably below expectations during August, with observers concerned that the latest figures reflect a slowdown among companies across the industry in recent weeks.

Confidence among construction firms apparently fell during August to the lowest ebb recorded since May, with uncertainty around Brexit the most commonly cited cause for relative pessimism.

Issues holding back infrastructure projects contributed to making civil engineering the worst performing area of the construction sector last month, according to IHS Markit’s monthly purchase managers’ index (PMI).

The index dropped to 52.9 in August from a 14-month high of 55.8 in July, with economists having expected the figure for last month to be close to 55.

Any number above 50 is taken to suggest that the construction sector as a whole is expanding but an easing of growth is nonetheless taken as a less than positive indicator of current trends.

The construction sector suffered a sharp rise in insolvencies during the earlier months of this year, with the number of companies going out of business jumping by as much as 73 per cent between Q1 2017 and the same period of 2018.

Performance among construction sector operators was also hindered for a number of weeks earlier this year by the impact of snowstorms that hit most of the country during early March.

IHS Markit’s PMI readings for July suggested that the sector could be back on the road to recovery but the latest information leaves the prospects for construction firms once again looking uncertain.

Construction sector insolvencies increased by 8 per cent over the course of 2017 as a whole but the numbers for this year are expected to increase again partly as a result of the collapse of Carillion, formerly one of the industry’s foremost contractors.

Carillion’s entry into administration at the beginning of the year left large numbers of construction sector sub-contractors significantly out of pocket and some facing the threat of insolvency.

According to small business finance company Funding Options, the length of time spent awaiting payments of invoices is also on the rise among construction companies across the country.