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UK Construction Sector Downturn Continues In October

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The UK construction sector continued to contract in October but the pace of weakness slowed amid the prolonged Brexit uncertainty, survey data from IHS Markit showed Monday.

The IHS Markit/Chartered Institute of Procurement & Supply construction Purchasing Managers' Index rose to 44.2 in October from 43.3 in September. The score was forecast to climb to 44.1.

Nonetheless, a score below 50 indicates contraction, moreover this was close to the ten-year low seen in June.

All three broad categories of activity namely civil engineering, house building and commercial construction logged lower volumes of work.

Civil engineering was the worst performing section, with business activity falling at the sharpest pace since October 2009. House building also decreased at a faster rate. At the same time, commercial construction deteriorated for the tenth straight month, but at the slowest pace since May.

The latest survey revealed a sharp reduction in new work in response to domestic political uncertainty and the economic backdrop. Respondents also cited unusually wet weather as an additional headwind to construction output.

Softer demand conditions and a lack of new work to replace completed projects resulted in another fall in staffing. Employment numbers declined in each month since April.

Business optimism towards the year-ahead outlook for construction work remained among the weakest seen since 2012. Political uncertainty also continued to cloud the outlook.

"To say these figures are disappointing is a big understatement," Duncan Brock, group director at the CIPS, said.

"Given that the next political hurdle is December's General Election, all eyes will be on the new administration and clear direction, because at the moment there is little insight into what could possibly pull the sector out of its ditch," Brock added.

With Brexit-uncertainty prolonged, a substantial improvement in commercial property construction or housebuilding seems unlikely, Amy Wood and Hansen Lu, economists at Capital Economics, said.

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