Election uncertainty puts brakes on building sector

Election uncertainty puts brakes on building sector

Strength of slowdown shown in construction PMI survey reveals how tight election race is putting ‘grit in the wheels of decision-making in the building sector’

Uncertainty over the general election affected British building sites last month, with construction output rising at the slowest rate in almost two years.

In the latest sign that the UK's economic recovery is faltering, the closely watched Markit/CIPS construction PMI survey showed all parts of the building sector weakened in April, including housebuilding.

The sharp slowdown surprised economists and sent the pound to a 10-day low against the dollar at $1.5088.

It gave up some of its gains against the euro – weak across the board – with €1 worth 73.33p compared with 73.20p before the data was published.

With just two days until the UK goes to the polls, the data dealt a further blow to David Cameron and George Osborne, who have marked out the economy as the key election battleground for the Conservatives.

Official figures published last week showed growth halved in the first quarter of 2014, to just 0.3%. It was the slowest since the end of 2012, when there were fears that the UK was heading for another recession.

Tim Moore, senior economist at Markit, said uncertainty over the outcome of the election had put "some grit in the wheels of decision-making" in the building sector.

"Construction firms widely noted delays with clients' budget setting and a reduced propensity to commit to new projects," he added.

The disappointing construction numbers, combined with a similarly poor equivalent survey for the manufacturing sector last week, suggest the UK economy got off to a weak start in the second quarter.

The UK recovery has so far been heavily dependent on the services sector, despite the government's ambition to rebalance the economy away from consumer spending and towards more manufacturing and exports.

“Together with a steep slowdown in manufacturing and disappointing GDP data, the construction survey adds to evidence that the UK economy has hit a soft patch,” said Chris Williamson, chief economist at Markit.

The headline index on the construction PMI fell to 54.2 in April from 57.8, where anything above 50 signals expansion.

Growth in housebuilding and commercial construction slowed and civil engineering work volumes shrank. New orders in the sector overall grew at the slowest rate since June 2013.

Despite slowing growth in the construction sector – where output is still below its pre-crisis peak – a shortage of subcontractors encouraged them to increase their prices at the fastest pace since the survey began 18 years ago.

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