Concerns about the future economic prospects for commercial property contributed to a decline in overall construction output in the new year, a new survey has revealed.
The IHS Markit / CIPS UK Construction Purchasing Managers Index recorded its first contraction in eight months in January. The index, which sets a mark of 50 as the activity level delineating growth and contraction, had a monthly reading of 49.2, the weakest figure since June 2020 and down from 54.6 in December.
While the overall drop was only marginal, different segments of the sector saw contrasting performances; while residential construction continued to display strong growth with a reading of 57.1, commercial construction was down at 46.2 and civil engineering at 45.
Purchasing managers remained in positive territory in terms of overall confidence in the prospects for the sector, but this was at its weakest level in three months.
Discussing the “renewed slide” in work volumes in January, IHS Markit director Tim Moore said: “Hesitancy among clients in January and worries about near-term economic conditions resulted in a dip in growth expectations for the first time in six months.”
Chartered Institute of Procurement & group director Duncan Brock made a similar observation, stating that “the commercial sector particularly acted as a brake to sustained recovery” as clients were reluctant to commit to work due to “concerns around the vitality of the UK economy”.
Predictions for how the UK economy will perform this year vary considerably, with the Bank of England’s Monetary Policy Committee (MPC) giving an upbeat assessment at its monthly meeting and the National Institute for Economic and Social Research (NIESR) offering a much gloomier prediction.
The MPC said the UK economy could “recover rapidly” in 2021 thanks to the rapid roll-out of vaccines, but the NIESR downgraded its forecast for economic growth this year to 3.4 per cent from its previous forecast of 5.9 per cent.
As well as the ongoing pandemic, the NIESR report highlighted issues arising from Brexit for its revised outlook.
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