Construction sector experiences summer slump
The construction sector slumped in August to its lowest level this year, according to the latest snapshot of the industry.
The Purchasing Managers’ Index (PMI) was at 51.1 for the month, down from 51.9 a month earlier and considerably below the expectations of City Analysts.
It is claimed that Brexit has played a key role in the decline, as decision makers have held off on major developments given overall market uncertainty.
While any Index figure above 50 is a sign of expansion for the sector, the figure for August is the lowest since the same month in 2016.
According to Duncan Brock, of the Chartered Institute of Procurement and Supply, a number of factors are to blame, including reduced government spending, “Brexit-delayed decision-making” and economic uncertainty.
IHS Markit meanwhile have suggested that weaker trends for purchasing and job creation in August are a sign of fragile business confidence.
Although housebuilding showed signs of improvement, levels of commercial work contracted at the quickest rate since July 2016, while the civil engineering sector stagnated.
Despite the outlook for the construction sector, the IHS Markit/ CIPS Manufacturing Index provided a robust PMI reading for August, with activity at its strongest level in four months.
Data from the Office for National Statistics reveals a mixed year in construction, as growth of 1.1% in the first quarter was followed by a 1.3% decline in output the following quarter.
Some in the sector have voiced concerns that recession could be a possibility, especially given the relatively slow rate at which Brexit negotiations seem to be progressing.
It is suggested that many firms are focusing on themselves which is resulting in a decline in demand for new large commercial projects and developments.
Construction firms facing difficulty should seek assistance from corporate insolvency specialists as support is available to assist with agreeing new favourable payment terms or with overcoming late payments or delays to subcontractor payments.
All of these factors can help to reduce the likelihood of insolvency and can ensure that funds are available to prevent delays and disruption in the construction supply chain.
By Phil Smith