UK construction confidence plunges to worst level in a decade

Last month, British construction firms were hit by the biggest drop in orders since the depths of the financial crisis.

Closely watched data from IHS Markit/CIPS recorded a fall in the construction purchasing managers’ index, which dropped to 45 last month from 45.3 in July. Any reading below 50 indicates a contraction in orders.

Gareth Belsham, director at the national property consultancy and surveyors Naismiths said, “The flow of new orders has dried up from a drip to a desert.

“We’re fast approaching the critical point where the pipeline of new work isn’t close to keeping up with the pace at which projects are being completed.

“This worsening shortfall is slicing into contractors’ margins and decimating confidence. Little wonder that business sentiment has slumped to its lowest level since the dark days of 2008.

“While the pain is being felt most acutely in commercial sector construction, the residential sector is also retreating into its shell.

“With housebuilders’ ability to mitigate the weakness elsewhere now gone, the mood on the frontline is getting steadily bleaker.

“Finance remains cheap and plentiful, with several challenger banks stepping up to keep developers’ wheels turning. But the brutal truth is many investors have decided to sit on their hands until Britain’s political paralysis ends.

“Whether the Brexit endgame brings an election, a ‘no-deal’ or both remains largely moot. For now all the construction industry can do is to batten down the hatches, complete existing projects and retain its capability in the hope that the final months of the year see an unblocking of three years of deferred investment.”