Construction activity slumped in July to its lowest level in almost a year, the latest snapshot of the sector reveals.
Monthly purchasing managers’ index (PMI) data from Markit/CIPS UK Construction showed a significant decline in building works, with a reading of 51.9 for last month – down from 54.8 in June.
A reading above 50 indicates growth. Economists had forecast a figure of 54.1.
Political and economic uncertainty dragged on demand for new projects, according to Tim Moore, associate director at IHS Markit.
Firms reported lower volumes of commercial and house building, plus a fall in new contracts since August 2016.
They cited clients’ reluctance to commit to new ventures, causing employment growth in the sector to sink to an 11-month low.
At the same time, supply chain pressures were “intense” as prices for materials increased at one of the sharpest rates since the first half of 2011, the report said.
The subsequent sharp fall in the value of the pound since the Brexit vote has made UK goods cheaper and more attractive for overseas buyers.
However, the PMI survey also showed the downside of the currency plunge, with firms linking higher costs to rising prices on imported raw materials and the exchange rate.
Duncan Brock, of the Chartered Institute of Procurement and Supply, which compiles the survey with researchers Markit, said: “The number of new orders dropped significantly this month and at the fastest rate since August 2016, as commitment-averse clients contributed to the sector’s weak trajectory.
“Commercial building activity slowed for the first time in five months and was the main drag on the Index.
“Housing, the shining light of the sector, eased marginally, but produced the slowest growth since April, as parallels with the darker days of Brexit, worries about the UK economy and post-election uncertainty can be seen across the construction sector.”
Economists warned the latest figures posed a threat to the industry in the coming months.
Howard Archer, chief economic adviser at the forecasting group EY Item Club, said: “Weakened economy activity, a lacklustre housing market and appreciable economic and political uncertainties threaten to be a damaging combination for the construction sector over the coming months.”
He added: “Construction companies will be hoping that recent government measures aimed at boosting infrastructure and house-building have a material beneficial impact.”
Sterling lifted 0.2% to 1.32 US dollars and was down 0.2% against the euro at 1.11 after the latest figures were published.
The outlook comes as Britain’s factories enjoyed a bounce-back in July thanks to the strongest surge in export orders for more than seven years.
Figures released by the Office for National Statistics last week recorded a 0.9% drop in construction in the three months to June, and a 0.5% fall in manufacturing output during the same period.