Civils activity surges to 19-month high

Activity in the civil engineering market ended 2018 at its fastest expansion since May 2017 according to new PMI data.

Respondents to the CIPS / IHS Markit PMI survey expect activity in the sector to continue to grow strongly in 2019. Confidence among construction firms rose to a nine-month high in December.

Lloyds Bank construction and infrastructure director Max Jones said: “Despite some well-publicised issues with a handful of flagship infrastructure projects, there remains strong appetite in this area from both clients and contractors and this activity continues to boost order books.”

The overall construction PMI dropped in December from 53.4 to 52.8, however, in spite of the strong civils performance due to a slowdown in the growth of commercial and residential work.

IHS Markit economics associate director Tim Moore said: “Subdued domestic economic conditions and an intense headwind from political uncertainty resulted in the weakest upturn in commercial work for seven months.”

There are concerns that ongoing Brexit uncertainty could see commercial activity slow further.

Chartered Institute of Procurement and Supply group director Duncan Brock said: “With a slight rise in new orders and a softening in overall activity growth, firms continued to be impacted by Brexit-related uncertainty and reluctance by clients to place orders especially for commercial projects.”

The uncertainty about the prospects of the different sectors has prompted some to take a more cautious approach to trading.

“Firms are realistic and there is little expectation that these challenging conditions will be much different in 2019,” Mr Jones said.

“That assumption is informing current behaviour, including balance-sheet strengthening and efforts to create leaner corporate structures and consequently chunkier profit margins.”

Source: Construction News (03/01/19)