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UK construction industry pessimistic on outlook

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World Cement,

Growth expectations in the UK construction industry are at their lowest ebb since December 2012, according to a recent industry survey, despite a marginal uptick in activity in October.

According to the latest UK Construction Purchasing Managers Index, which is published monthly by IHS Markit and the Chartered Institute of Procurement and Supply (CIPS), the balance of construction firms expecting an increase in business activity over the next year fell to its lowest level in 58 months.

Job creation also remained subdued in response to the industry’s darkening mood.

The pessimistic outlook sends a “chill down the spine”, said Duncan Brock of the CIPS.

“With the lowest optimism since December 2012, purchasing managers blamed a slowdown in work from commercial clients, vanishing civil engineering projects, and an increasing weariness over Brexif for the lack of performance, weak pipelines and slowdown in job hires.”

An increase in residential work helped push the index into growth territory for the first time in four months. However, commercial and civil engineering activity both fell again with civil engineering experiencing its softest patch for around four and a half years.

There was also concern from survey respondents that residential work was also facing an uncertainty.

“Any heavy reliance on residential building alone would be foolhardy with interest rate rises on the horizon and availability of skilled workers lacking in the sector,” continued Brock. The Bank of England recently announced a rise in interest rates to 0.5% - its first rate rise in a decade.

Further evidence of a slowdown in the UK construction market came from the Mineral Products Association (MPA), which recently said that market demand for building products had fallen in 3Q17.

Sales of aggregates and ready-mixed concrete was down 5.1% and 5.3%, respectively, in 3Q17 compared to the previous three months. Asphalt and mortar sales also took a dip.

“Mineral products producers find themselves facing something of a dilemma, with construction activity in housing and commercial building expected to slow down this year, whilst the big infrastructure projects are only expected to come in full capacity in 2018/19,” said Aurelie Delannoy, Chief Economist at the MPA.

“Given the current macroeconomic and political uncertainties, it is of the utmost importance for business confidence that planned projects do not see any further delays, as this may have a detrimental impact on future industry investment and the supply chain.”

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