New research has revealed uncertainty over the EU referendum has contributed to another dip in construction output for UK firms.

The latest Markit/CIPS UK Construction PMI index posted 51.2 in May, down from 52.0 in April and slightly above the 50.0 no-change mark.

Overall, the latest reading signalled the weakest rise in business activity for almost three years.

The report states a number of firms noted reluctance among clients to place orders and commence contracts until after the EU referendum vote later this month, while anecdotal evidence pointed to a "general lack of client confidence" due to heightened uncertainty over the economic outlook.

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However, respondents are positive about their year-ahead prospects, with over half of the survey panel predicting a rise in output.

Staff hiring continued to perform strongly in May, marking three years of continuous job creation. In addition, an increase in payroll numbers has been linked to new project starts and high levels of orders-in-hand.

David Noble, Group CEO at the Chartered Institute of Procurement & Supply, said: "The sector appeared to have taken residence in a waiting room of non-activity, as continuing poor global economic conditions and uncertainty around the EU referendum impacted growth and new orders.

"Supplier performance degraded and continued its downwards trend which began in September 2010. Purchasing activity ground to a virtual standstill.

"The chink of light appeared to be the industry’s optimism for the future and an indication that that this may be a short-term situation as employment continued to rise to a four-month high and job creation has been continuous for three years. Once again the industry holds its breath to see what the coming months will bring as housing sector growth in particular remains weak."

(LM)