UK construction sector expands at steady pace in March, Markit survey shows

Britain's construction sector held steady in March, defying analysts' expectations for a slight decline, a survey released on Monday (4 April) from Markit Economics and the Chartered Institute of Procurement & Supply showed.

The Markit/CIPS UK Construction Purchasing stood at 54.2 last month, unchanged from February's 10-month low but marginally better than the 54.1 reading analysts had expected. The figure marked the 35th consecutive month of expansion but indicated the joint-slowest rate of output growth since June 2013.

Increases in commercial work and engineering activity were both offset by another slowdown in residential building, as the latest increase in housing activity was only marginal and the weakest recorded since January 2013.

"The government will be particularly disappointed to see housebuilding growth almost ground to a halt in March when it was at its weakest level since January 2013 – given that it is looking to address the UK's acute housing shortage," said Howard Archer, chief UK and European economist at IHS Global Insight.

"With the corresponding manufacturing survey also weak for March, first quarter GDP growth again looks to have been heavily dependent on the services sector."

Construction companies were more cautious in terms of hiring last month, with the rate of employment growth easing to its slowest since June 2013, the survey added. Meanwhile, 51% of survey respondents said they expect a rise in business activity at their units over the next 12 months, while only 11% forecast a reduction. However, while this signalled that UK construction companies remain optimistic about their prospects for growth, the overall degree of confidence was the joint-lowest since December 2014.

"Heightened uncertainty about the business outlook appears to have weighed on overall construction demand so far in 2016, with survey respondents citing cautious client spending patterns and a reduced willingness to commit to new projects," said Markit's senior economist Tim Moore.

"As a result, volumes of new work disappointed in March as order book growth slipped for the third month in a row and reached its weakest since the pre-election blip last year."