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Construction output slows for July

Construction output slowed in July, having hit an 11-year peak in June, with the residential market showing the most significant slowdown.

The Markit/CIPS UK Construction Purchasing Managers’ Index for July was down to 58.1 points from June’s peak of 59.4, suggesting the bounce immediately following May’s general election could be coming to an end.

“July’s growth slowdown is the first for three months and perhaps a sign that the post-election impact on construction confidence has started to diminish,” said Tim Moore, senior economist at Markit and author of the construction PMI.

“Reflecting this, UK construction firms’ business activity expectations moderated from June’s 11-year peak but remain strong overall.”

Despite the slowdown, the PMI, which measures confidence among supply purchasers in the industry, was still well above the 50-point ‘no change’ mark, driven chiefly by commercial activity, which rose at its fastest rate since March.

Civil engineering activity expanded at a slower rate than the previous month and the residential market, while also still expanding, did so at its slowest rate for two years.

Mark Robinson, chief executive of public sector procurement group Scape, said: “The post-election activity surge seen in last month’s report tapered off slightly in July.

“However, our own analysis of government data shows the immediate election aftermath is a time of renewed optimism and growth, so a slight dip in output levels at this point in the year is not a cause for alarm.”

Mr Robinson added that the continuing skills shortage in the sector was “a more worrying theme”.

The index noted “widespread reports of skill shortages across the sector”, with subcontractor availability falling for the 25th consecutive month.

“The sector has serious skills gaps,” said Chris Temple, head of engineering and construction at PwC.

“While the government’s plan to create 3 million more apprentices by 2020 will help in the long term, the situation will get worse before it gets better, as older, skilled workers retire.

“The shortage is also driving up subcontractor bills and this, combined with continuing rises in the prices of construction supplies, means firms may continue to feel pressure on margins.”

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