April 2, 2019 / 9:29 AM / in 22 days

UK construction activity slows for second month running: PMI

LONDON (Reuters) - British construction activity slowed slightly for the second month in a row in March, as businesses continued to postpone major building projects due to Brexit uncertainty, an industry survey showed on Tuesday.

FILE PHOTO: Construction cranes are seen above a refurbished Mill building in the city centre of Manchester, Britain, February 23, 2019. REUTERS/Phil Noble/File Photo

The IHS Markit/CIPS Purchasing Managers’ Index (PMI) edged up to 49.7 from 49.5 but remained below the 50 mark that divides growth from contraction, representing the first back-to-back fall in output since August 2016, just after Britain voted to leave the European Union.

Housebuilding continued to record moderate growth, but civil engineering fell and commercial projects — such as new shops, factories or warehouses — dropped off at the fastest rate since September 2017.

“Brexit-related uncertainty continued to generate indecisiveness, ultimately hitting order book volumes,” said Joe Hayes, an economist at IHS Markit, which compiles the survey.

For a graphic on UK construction PMI suffers from Brexit nerves, see - tmsnrt.rs/2CRFPys

Official data last week showed construction output grew just 0.3 percent in 2018, the weakest in six years.

Although new orders grew slightly faster in March, they were below their long-run average and construction firms reported tougher-than-usual competition, IHS Markit said.

Max Jones, a commercial banker at Lloyds Bank, said firms in the construction industry were focusing more on cashflow and avoiding low-margin work due to concern about future headwinds.

“We’re starting to see smaller firms addressing their balance sheets by paying closer attention to late payers, which is applying pressure onto larger contractors who are watching cashflow carefully too,” he said.

Builders also reported increasing delays in getting supplies, due to low stocks and stretched capacity from vendors, while raw materials costs rose at the fastest rate in four months, due to a weak currency and some shortages.

The survey had previously shown delays to building supplies in February, when the construction industry blamed a lack of transport capacity due to increased pre-Brexit stockpiling by manufacturers who relied on imports from the EU.

March’s survey of manufacturers, released on Monday, showed a further increase in stockpiling to a fresh survey-record level for a major advanced economy.

Britain had been due to leave the EU on March 29 but Prime Minister Theresa May was forced to ask for a delay after parliament refused to back the exit plan she had negotiated with Brussels.

Brexit is now due to take place at 2200 GMT on April 12 unless May comes up with another option.

Reporting by David Milliken; Editing by Catherine Evans

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