New figures have revealed the UK's construction industry output grew slightly in October.

The latest IHS Markit/CIPS UK Construction Purchasing Managers’ Index posted 50.8 for the month, up from 48.1 in September.

Despite rising, the figure signals only a marginal rise in overall construction output and was wearker than the post-crisis trend (54.7). In addition, optimism from firms' expectations for future business activity dropped to a five-year low.

Commercial building activity decreased for the fourth month running in October, with respondents citing worries about the UK economic outlook and subsequent delays to decision-making among clients as reasons for the fall.

Civil engineering was the worst performing sub-category, with some firms citing a lack of big- ticket infrastructure projects to replace completed contracts.

However, residential building work increased at a faster rate than in September, but still subdued in comparison to the average for 2017 to date.

New work also marginally increased, thereby ending a three-month period of decline. Yet, the rate of new order growth remained weaker than recorded at any time from mid-2013 to early last year. Respondents generally cited fragile client demand, with heightened economic and political uncertainty acting as a brake on growth.

-- Advertisement --

With expectations for business activity reaching a 58-month low in October, firm widely linked the drop in confidence to concerns about UK economic prospects and a lack of new projects in the pipeline.

As a result, job creation remained subdued in October and input buying increased only marginally. Intense supply chain pressures were also recorded, driven by low stocks and constrained capacity among vendors.

Some firms noted that a recovery in demand for construction products across the euro area had added to cost pressures, alongside the weaker sterling exchange rate. In addition, input prices rose sharply yet the rate of inflation remained softer than the near six-year peak seen at the start of 2017.

Duncan Brock, Director of Customer Relationships at the Chartered Institute of Procurement & Supply, said despite construction orders improving for the first time in four months, the sharp fall in business confidence "will send a chill down the spine".

"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 Brexit for the lack of performance, weak pipelines and slowdown in job hires," he said.

"Supply chains were under the cosh again this month, as buyers struggled to get the materials and products they needed due to low stocks and squeezed supply, exacerbated by increased construction demand in the Eurozone. There were also reports of increasing shortages in some raw materials which slowed work already underway.

"Housing continued to show the strongest foundations and is set to be the main driver of growth in the coming months but the prospect of softer consumer demand and rising costs will impact.

"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, unless the Chancellor pulls a rabbit out of the hat and supports the training of new construction workers, the pound recovers some stability and a surge of supply capacity become available."

(LM)