UK construction grows at slowest pace for 17 months

Construction output expanded at its slowest rate since July 2013, Markit has said

Activity in the UK's construction sector grew at its slowest pace for 17 months in December but remains robust thanks to continued growth in housebuilding, a survey has found.

The closely watched Markit/CIPS purchasing managers' index (PMI) fell to 57.6 from 59.4 a month earlier.

The index remains above the 50-mark which indicates growth in the sector.

Housebuilding continued to drive construction activity, but grew at its slowest pace since June 2013.

The weakest construction sub-sector in December was civil engineering, which reported a fall in output for the first time since May 2013.

Despite the slowdown in December, Markit said housebuilders overall had enjoyed their best year since 1997.

Construction companies also reported "a solid increase in new business volumes in December", Markit said.

Confidence

The survey said anecdotal evidence pointed to strong demand for new residential development and a further recovery in construction firms bidding for commercial projects.

Markit also reported signs that wages might be starting to rise in the sector, with rates paid to subcontractors growing almost as rapidly as November's record-high pace.

Economists are forecasting that after several years of falling real wages, 2015 might bring the first year that the UK sees widespread increases in pay since the 2008 financial crisis.

Construction firms pointed to new housebuilding as a key area of growth in 2015. Uncertainty surrounding the general election later this year - at which the main political parties are expected to outline how they would tackle the UK's continuing budget deficit - was expected to weigh on confidence.

Tim Moore, senior economist at Markit, said: "A sharp recovery in housebuilding, as well as resurgent demand for commercial development projects, continued to boost staff recruitment and sub-contractor pay rates across the construction sector in December.

"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."