UK construction PMI unexpectedly fell in December

December data from IHS Markit/CIPS pointed to another sharp reduction in construction output, with a downturn persisting across all three broad categories of activity. Survey respondents attributed the latest drop in their workloads to political uncertainty and subdued client demand ahead of the general election.

At 44.4 in December, down from 45.3 in November, the headline seasonally adjusted UK Construction Total Activity Index registered below the crucial 50.0 no-change value for the eighth consecutive month. The current period of falling business activity across the construction sector is the longest recorded by the survey for almost a decade. Economists had expected an increase to 45.9.

Civil engineering was by far the worst-performing category of construction in December, with activity falling at the fastest pace since March 2009. Anecdotal evidence suggested that political indecision and delays with contract awards for new projects had led to falling business activity. Latest data also revealed a sharp drop in commercial work, which was partly attributed to clients opting to postpone spending decisions ahead of the general election. Meanwhile, house building dropped for the seventh month running in December, but the rate of decline was only modest.

In contrast to the subdued output trends reported during December, construction companies indicated that their optimism towards the year-ahead business outlook rebounded to a nine-month high. A number of firms suggested that greater clarity in relation to Brexit had the potential to boost order books in 2020.