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Respite rather than relief as construction PMI falls again

For the sixth month in a row Britain’s construction industry has seen another dip in activity, with Brexit uncertainty preventing people from making changes to their properties. This pulled the Construction PMI index down to 44.2.

The construction Purchasing Manager's Index (PMI) is a diffusion index that incorporates survey results provided by construction firms throughout the UK. A reading above 50 suggests the construction sector is expanding, while a reading below 50 suggests the construction sector is in contraction.

Gareth Belsham, director of the national property consultancy and surveyors Naismiths, commented: “So far this is more a case of respite rather than relief. Construction output is still falling, even if the rate of decline is a little less punishing.

“What silver linings there are, are modest. The number of new orders coming in is sliding fast, but at least the latest drop was less than that seen in August and September.

“Investor appetite remains deeply fragile and many contractors are being pummelled on three fronts. Just as their order books get thinner and erode their confidence, they are being forced to bid low for the shallow pool of new work available – while at the same time input costs go up and slice into their margins.

“No wonder many construction firms are trying to cut costs where they can, and staffing levels have fallen every month since April.

“Nevertheless, there are some glimmers of hope. While Britain’s Brexit agony has been put on pause by what promises to be an equally divisive election hiatus, the chances of a chaotic ‘no-deal’ exit have at least diminished.

“While few would bet on a magical return to business as usual after the December election, even a modicum of stability could lead to the thawing of long-delayed projects.

“Until then the industry has little choice but to knuckle down and retain enough capability to cope with the day – whenever it comes – that demand returns to more normal levels.”

Whilst the PMI recorded at the start of November is below 50, it is an improvement from the previous months reading of 43.3, suggesting that things may still turn around for the construction industry.

4 November 2019

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