A fall in civil engineering work last month restricted the building industry to its slowest period of expansion since the summer of 2013, according to survey data.
Budget constraints in the public sector and skills shortages in civil engineering held up infrastructure schemes in December, ending an 18-month run of expansion in the sector.
In the wider construction industry, a strong performance by the housebuilding sector kept the overall Markit/CIPS construction purchasing managers’ index well above the 50 mark that indicates expansion, though it fell to 57.6 in December from 59.4 in November.
Markit said 2014 marked the best year for housebuilding since it started collecting records in 1997, and firms were looking forward to a healthy 2015.
Tim Moore, senior economist at Markit, said: “While new business growth moderated to its lowest for a year and a half in December, UK construction firms are still highly upbeat about their prospects for output growth in 2015.”
However, the Markit survey showed that housebuilders were operating at capacity with little room to expand in the coming months.
Allied with official data covering July to September 2014, which revealed an 11% drop in the number of new home starts as the housing market cooled, it will raise concerns that the building industry will fall well short of the UK’s housing needs. New home starts are averaging 120,000 a year while experts believe at least 200,000 are needed to keep pace with demand.
Moore said the survey also showed signs that wages are starting to rise in the sector, with rates paid to subcontractors growing almost as rapidly as November’s record pace.
Economists have forecast that, after years of falling real wages, 2015 may bring the first widespread increase in pay since the 2008-09 financial crisis.
Construction accounts for 6% of the UK economy. A similar survey of the manufacturing sector published by Markit on Friday also showed slower growth.
Rob Wood, chief UK economist at Berenberg bank, took an upbeat view of the outlook, saying the slowdown should prove to be “mild and temporary”.
David Noble, group chief executive officer at the Chartered Institute of Procurement & Supply, said the construction sector’s output was levelling off “with a weaker trajectory than that seen in recent months”.
He said: “The sector has become a victim of its own success as it struggles to keep up with its own speed of recovery. With increases in new business, comes pressure on the availability of talented staff and a squeeze on the performance of supply chains.
“Still replacing the skills lost in the recession and faced with increasing charges for the subcontractors used to fill in the shortfall, the sector is enjoying lower commodity prices to balance out costs. As more new business comes in, so vendor performance is being affected and key raw material delivery times are lengthening.”
