High street store closures are adding to the mounting problems facing Britain’s construction industry, despite a modest uplift from good weather over the past month.
While the industry continued to stage a modest recovery in May after bad weather earlier this year, reduced demand from struggling retailers was one reason cited by the latest IHS Markit/CIPS purchasing managers survey for the fourth decline in new orders in five months.
Some builders suggested unusually good weather over the past month helped boost activity levels, along with catching up from weaker business triggered by the “beast from the east” in late February and early March. The reading on the IHS Markit/CIPS construction PMI remained steady at 52.5 points in May, against economists’ forecasts for a slight decline in activity from the previous month.
However, Sam Teague, an economist at IHS Markit, cautioned that a renewed drop in new work “hinted that the recovery could prove short-lived”.
According to the latest health check, house building remains the strongest area for the construction industry, while demand for commercial and civil engineering projects remains muted amid political uncertainty.
Having come under pressure from a slowdown in consumer spending triggered by weak wage growth and high levels of inflation caused by the Brexit vote, retailers are cutting their demand for new shops, which is having a knock-on effect for building firms. Several major retailers including Marks & Spencer have closed stores this year in an effort to maintain profits.
Job creation among builders fell to a four-month low in May, while companies also continued to report skills shortages. Purchasing costs for construction firms rose sharply, particularly for fuel amid the rising cost of petrol across the UK, as well as for materials made from plastic and steel.
Phil Harris, a director at BLP Insurance, said: “Office space demand in London is declining, retailers continue to hit the headlines with store closures, and while hotels and leisure are proving resilient, overall the sector is not booming.”
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