Looming Brexit deadline blamed for construction growth hitting 10-month low

The fast approaching Brexit date for the UK is unsurprisingly the biggest concern for construction firms as the latest findings show output plummeting to levels not seen for nearly a year.

According to the latest IHS Markit/CIPS UK Construction Total Activity Index, contraction output has fallen to its lowest point in ten months, dropping from 52.8 in December to 50.6 in January. While, employment growth within the sector has fallen to a two-and-a-half year low. 

Commercial work was identified as the weakest performing area of construction output, while small improvements in residential mean it was the strongest performing area in January. 

The survey also reported how staff recruitment grinded almost to a halt in January, with construction firms presenting the softest rate of job creation since July 2016.

Despite the worrying statistics, firms still remain positive about the outlook for this year with 41% expecting a rise in output. Large-scale civil engineering projects were the main source of optimism within the industry.

Tim Moore, economics associate director at IHS Markit, said: “UK construction growth shifted down a gear at the start of 2019, with weaker conditions signalled across all three main categories of activity. Commercial work declined for the first time in ten months as concerns about the domestic economic outlook continued to hold back activity. The latest survey also revealed a loss of momentum for house building and civil engineering, although these areas of the construction sector at least remained on a modest growth path. Delays to client decision-making on new projects in response to Brexit uncertainty was cited as a key source of anxiety at the start of 2019.”

The announcement follows the launch of the latest Impact of Government Policy Index (IGPI), which shows small construction firms shouldering a 28% increase in policy-linked costs since 2011, a greater rise than any other sector. 

The Federation of Small Businesses (FSB) claim the data underlines the impact that political uncertainty is having on the sector.

FSB national chairman Mike Cherry added: “Spiralling employment costs, skills shortages and a weak pound have made it increasingly tough for small construction firms to grow in recent years. Small business confidence is at a seven-year low. Two-thirds of firms are not planning to increase investment and, with inward migration from the EU down, more than a third say lack of the right staff is holding them back. A lot of small construction firms rely heavily on mid-skilled employees from Europe."