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How did the construction market shape up in Q3 2019?

According to the latest Construction PMI figures, building activity in Q3 of 2019 fell at the second-fastest rate since April 2009.

It suggests that the UK construction industry is stuck in a downturn. Especially after a historically steep drop in new orders recorded, as firms scaled back employment at the fastest rate since the end of 2010 due to unfavourable demand, client hesitancy and low confidence.

Q3 at a glance

  • Commercial activity was the worst performing sector with civil engineering and residential building not far behind.
  • Buying levels declined at the joint-fastest rate since January 2010 due to lower operational requirements and increased efforts to contain costs.
  • Unsurprisingly, Brexit uncertainty was given as a major factor in the severe slow down of activity.
  • However, UK construction firms were mildly optimistic that output volumes would pick up over the coming 12 months.

Phil Harris, director at BLP Insurance, who have a wealth of experience within the construction sector, said

“If PM Boris Johnson can carve out the legislative space to make good on the flurry of infrastructural commitments, this could provide the vital dose of confidence needed to kick-start growth. HS2 continues to serve as a litmus test of what could be. If the promised review results in cancellation then the shockwaves are likely to hurt both the residential market and general sentiment.”

Projects by region

The Midlands, the North West and Yorkshire and the Humber saw levels of construction activity remain quite high.

Comparatively, key regions including London, the South East and parts of the East of England have seen declines in activity.

Types of Project

  • Public new housing and infrastructure output are two areas where we’ve seen growth.
  • Year on year private new housing output was 5% higher despite being slightly down on the previous three months.
  • Public non-residential output slipped by 9% against the previous three months but was only 2% down year on year. 
  • Industrial and commercial sector output were 6% and 5% down on a year ago respectively.

Looking ahead within the construction sector

Looking at construction forecasts from now until 2021, infrastructure is set to be the key driver of overall construction growth. The sector is predicted to reach a record high of £26bn in 2021 compared with £20.6 billion in 2018. 

This will largely be driven by a pipeline of work in the electricity, rail and water & sewerage sub-sectors, which includes main works on high-profile projects, including the Thames Tideway Tunnel, High Speed Rail and Hinkley Point C.

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