U.K. Construction Sector Loses Momentum in January

January saw a slowdown in construction sector growth in the United Kingdom, with both business activity and incoming new work expanding at weaker rates than at the end of last year. Regardless, confidence over the year ahead picked up to its strongest level since December 2015, according to the U.K. Construction Purchasing Managers’ Index (PMI) from Markit/CIPS.

“U.K. construction firms experienced a subdued start to 2017, with all the key categories of activity losing momentum,” said Tim Moore, senior economist at IHS Market. “While house building retained its position as the fastest-growing part of the construction sector, the latest upturn was the weakest since the post-referendum rebound emerged in September 2016.”

The seasonally adjusted PMI registered 52.2 in January, down from 54.2 in December. All three subsectors—housing, commercial and civil engineering—recorded softer rates of output growth in January.

“New business volumes also expanded at a softer pace in January, but there were more positive trends in terms of staff hiring and business optimism regarding the year-ahead outlook,” Moore said. “The latest survey revealed an accelerated rise in payroll numbers at construction companies, as well as the fastest upturn in subcontractor usage since the end of 2015.”

Staff hiring in the construction sector at the start of 2017 was attributed to planned project starts in the coming months. The increase in employment numbers was the fastest for eight months, indicating sustained improvement in business confidence among construction companies. More than half (51%) of those surveyed foresee a rise in business activity over the next year. Meanwhile, the weak pound continued to have an inflationary impact on the sector in January, with purchasing costs increasing at the strongest rate in over eight years.

– Adam Fusco, editorial associate

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