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Construction orders drop to decade low ‒ IHS Markit

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  • 04/09/2019
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New construction orders have fallen at their fastest pace in a decade, the latest industry data has revealed.

 

According to the IHS Markit/CIPS UK Construction Total Activity Index, orders have now fallen in each month since April, with the current rate of contraction the fastest seen since March 2009.

The report noted that anecdotal evidence had pointed to weak demand conditions, leading to a lack of tender opportunities, coupled with strong competition for new work.

IHS noted that all three broad categories of construction work fell in August, with commercial building the biggest decliner. Respondents to the survey blamed “Brexit-related uncertainty” which had caused clients to become more risk averse and set tighter budgets.

However, the report did highlight that house building “fell only slightly”, with the rate of decline the least marked since the downturn began in June.

 

Dropping like a brick

Duncan Brook, group director at the Chartered Institute of Procurement and Supply (CIPS), said that business confidence was “dropping like a brick” to the lowest levels seen since December 2008, and cautioned that the commercial sector in particular has been “devastated” by the confusion reigning over Brexit.

He added: “The reality is, if a revival of confidence and a flood of new orders return to the construction sector in the coming weeks, much like a large tanker turning in a dock, there is little room for the sector to improve in the last quarter of the year. It’s likely September’s data will be even more discouraging.”

Gareth Belsham, director of Naismiths, suggested the flow of new orders had “dried up from a drip to a desert” and warned that we are approaching the point where the pipeline of new work is not close to keeping up with the pace at which projects are being completed.

He continued: “While the pain is being felt most acutely in commercial sector construction, the residential sector is also retreating into its shell. With housebuilders’ ability to mitigate the weakness elsewhere now gone, the mood on the frontline is getting steadily bleaker.”

 

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