UK construction growth slides to 1-year low in August

[LONDON] Growth in Britain's construction firms fell unexpectedly to a one-year low in August, hit by an investment slump in the commercial sector as Brexit uncertainty weighed on the economy, a survey showed on Monday.

Countering more upbeat news about the economy last week, the Markit/CIPS Construction Purchasing Managers' Index (PMI) fell to 51.1 from 51.9 in July, closer to the 50 mark that indicates stagnation. A Reuters poll of economists had pointed to a reading of 52.0.

Monday's PMI underlined the uncertain outlook for an economy that has become increasingly difficult for the Bank of England to gauge.

A similar survey of manufacturers published on Friday had hinted at a strengthening of economic growth in the second half of the year.

Britain's economy had its slowest first half of the year since 2012 as households came under pressure from a big rise in inflation following the fall in sterling caused by last year's Brexit vote.

So far, construction, manufacturing and exports have failed to compensate for the consumer slowdown.

Housebuilding was the only construction sector to generate significant growth during August, the PMI showed.

Civil engineering activity was broadly flat, while the commercial construction sector contracted at the fastest pace since July last year - just after Britain voted to leave the European Union.

"There were signs that UK construction firms are bracing for the soft patch to continue into this autumn, with fragile business confidence contributing to weaker trends for job creation and input buying during August," Tim Moore, an associate director at IHS Markit, said.

Survey compiler IHS Markit said the murky economic outlook for Britain weighed on commercial building, with clients delaying spending decisions or even scaling back projects.

New orders across construction as a whole fell for a second month, albeit not as sharply as in July.

Construction makes up around 6 per cent of British economic output. The Markit/CIPS survey for the much larger services sector - which accounts for nearly 80 per cent - is due at 0830 GMT on Tuesday.

REUTERS