Election uncertainty damps UK construction activity in April

Britain's construction activity slowed down sharply last month as uncertainty over this week's general election led developers to be more cautious over their spending decisions.

The UK construction purchasing managers' index hit a two-year low of 54.2 in April, down from 57.8 in March, though still above the 50 mark that separates an expansion from a contraction.

The new data will add to concerns over the health of the British recovery. The UK grew by 0.3 per cent in the three months to March, down from 0.6 per cent in the last quarter of 2014. A separate survey last week showed that manufacturing activity also slowed in April.

"Together with a steep slowdown in manufacturing and disappointing gross domestic product data, the construction survey adds to evidence that the UK economy has hit a soft patch," said Chris Williamson, chief economist at Markit.

This adds to worries over how Thursday's poll will affect the economy. The Conservative and Labour parties are running neck and neck in the polls and neither is expected to win an overall majority, potentially leading to a phase of prolonged political uncertainty.

"A number of survey respondents suggested that uncertainty related to the forthcoming general election had contributed to delays in clients' spending decisions," said today's construction PMI report from Markit, the data firm.

Residential building activity was the best performing area of the industry, while commercial construction work fell for the first time in four months.

The construction sector continued to create jobs, however, though at a pace that was below the average for last year.

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Britain's labour market has tightened significantly in recent months, with employment hitting a record high of 73.4 per cent. Economists expect this should eventually translate into increases in wages, the missing ingredient of the recovery.

Business confidence in the construction industry fell from the nine-year high it reached in March but remained above its long-run average.

However, some survey respondents said they expected the outlook to brighten as political uncertainty disappeared after the vote.

"If a sustainable government emerges from the general election and political uncertainty wanes, there are grounds for optimism on the construction sector over the coming months despite the recent weakened performance," said Howard Archer, chief European and UK economist at IHS Global Insight.

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