UK construction sector grows at slowest pace since April as confidence hits 13-month low

Britain's construction sector grew at its slowest pace in nine months in January, as the rate of growth in order books slowed down and firms took on less staff than expected, figures released on Tuesday (2 February) showed.

The Markit/CIPS UK Construction Purchasing Managers' Index fell from 57.8 to 55.0, remaining above the 50 threshold that indicates expansion, but falling short of the 57.6 reading analysts expected and marked the slowest rate of growth since April 2015.

"UK construction firms struggled for momentum at the start of this year, with heightened economic uncertainty acting as a brake on new orders and contributing to one of the weakest rises in output levels since the summer of 2013," Markit economist Tim Moore said.

Order books grew at the weakest pace in four months and the rate at which construction companies hired staff was the slowest since September 2013, Markit said, adding the slowdown was mainly attributable to housebuilding and commercial property work.

Meanwhile, optimism among construction firms declined to its lowest level since 2014, which indicated companies are bracing themselves for a relatively subdued quarter, Moore said.

Analysts said the disappointing figures reflected a lack of confidence in the building sector, with firms forecasting weak production growth in the short-term future.

"The fall in the future activity index to its lowest level since December 2014 and the drop in the employment index to a 29-month low indicate builders expect output growth to remain weak for the foreseeable future," said Samuel Tombs, chief UK economist at Pantheon Macroeconomics.

"Moreover, the weakness of the official data on construction orders and the downturn in public sector infrastructure work — which accounts for about one-quarter of total construction and is not covered by the PMI — suggest the sector will see only lacklustre growth in 2016."

The construction PMI was in stark contrast with a much more upbeat manufacturing reading released on 1 February, which showed the sector enjoyed a better-than-expected start to the year, as the PMI climbed to a three-month high.