UK construction activity contracts amid 'uncertainty'

Activity in the UK construction sector contracted for the first time in 13 months in September, according to a closely watched survey.

The IHS Markit/CIPS purchasing managers' index (PMI) for the sector fell to 48.1, below the 50 mark that separates growth from contraction.

The survey found "political and economic uncertainty" had affected the commercial property industry.

It also reported a "steep" fall in civil engineering work.

The survey found that new construction work had fallen for the third month in a row, which it said was the longest period of decline since early 2013, excluding the drop-off in work following the EU referendum last June.

Some companies said the fall in civil engineering work - the steepest for almost four-and-a-half years - was due to a lack of new infrastructure projects to replace completed contracts.

IHS Markit said that house building was the only area of construction which showed a rise in activity last month, but added that momentum had eased because of "worries about less favourable market conditions ahead".

"Fragile client confidence and reduced tender opportunities meant that growth expectations across the UK construction sector are... among the weakest for four-and-a-half years," said IHS Markit's Tim Moore, the author of the report.

"At the same time, cost pressures have intensified, driven by supply bottlenecks and rising prices for imported materials."

Howard Archer, chief economic adviser to the EY Item Club, said: "There is the particular concern that potential clients will be cautious over committing to major projects if economic, political and Brexit uncertainties remain elevated over the coming months.

"Construction companies will be hoping that recent government measures aimed at boosting infrastructure and housebuilding have a material beneficial impact."

On Monday, the PMI survey for manufacturing indicated that the pace of growth in the sector slowed slightly last month, with a reading of 55.9 compared with 56.7 in August.

As a consequence, Mr Archer said that "much attention" would now be focused on the PMI survey for the service sector, which is due to be released on Wednesday. The service sector accounts for about three quarters of the UK's economy.