UK and USA construction firms brace for tough Q3
Cuts in public sector spending and homes projects paint bleak picture
The UK and US construction industries are bracing themselves for a tough third-quarter as market indicators show a marked slowdown over the past three months.
Research by the Markit/CIPS (Chartered Institute of Purchasing and Supply) construction Purchase Managers’ Index in the UK shows growth in the market has dipped for the third consecutive month, down to 52.1 in August from 54.1 in July.
Within the industry’s three sub-sectors – manufacturing, residential and public ¬– a decline in the residential construction market has alarmed experts the most. Much of the growth in the construction industry over the past six months has been within the residential market, and a slowdown means some businesses may find it difficult to make ends meet.
While construction output rose by 8.5% on the quarter and 7.7% on the year, manufacturing fell to its lowest level since November, which leads analysts to believe that Q3 will be well below Q2.
Though there was a slight increase in public sector projects, looming cuts in government projects construction spending, announced in May by chancellor George Osborne, paint a bleak future for contractors involved.
Conditions are even worse in the US where a drop in construction spending for July wiped out any gains the industry made earlier in the year. Analysts recorded an 11% drop in construction spending in the year ending July 31 with government funded projects suffering the most.
It’s anticipated that a slump in housing demand is on its way as the government’s homebuyer tax credit stimulus incentive comes to an end. Despite record-low mortgage rates, private construction spending fell by 0.8%, while fewer homes were built and building permit applications fell to the lowest level for more than 12 months.