2019.10.0207:52:00UTC+00UK Construction Sector Logs Severe Downturn

The UK construction sector stuck firmly in negative territory in September, as Brexit uncertainty dragged demand as well as sales, survey data from IHS Markit showed Wednesday.

The IHS Markit/Chartered Institute of Procurement & Supply construction Purchasing Managers' Index fell to 43.3 in September, while the score was forecast to remain unchanged at August's 45.0.

This was the second strongest contraction since April 2009. Any reading below 50 indicates contraction.

Overall, the performance of the UK economy once again hinges on the service sector showing a marked degree of resilience to offset the weakness seen in construction and manufacturing, Joe Hayes, an economist at IHS Markit, said.

The commercial sector was a notable casualty in September, Hayes noted. Among three segments, commercial activity was the worst-performer.

At the same time, civil engineering activity dropped at a similarly sharp rate that was the fastest in close to a decade and residential building signaled a fourth successive monthly decrease.

Overall demand in the sector weakened again in September after posting the steepest decrease since March 2009 last month. There were no signs of recovery as Brexit uncertainty caused clients to postpone demand.

Further, the strong dip in sales coincided with a tapering of purchasing activity. Companies reduced employment at the strongest rate since 2010 in order to cut cost. The fall in staffing levels was the sixth in as many months.

On the price front, the survey showed that input prices continued to rise at a strong rate partly linked to greater fuel expenses and higher supplier charges for certain raw materials.

Looking ahead, UK construction firms were mildly optimistic that output volumes would pick up over the coming 12 months.