UK Construction work fell for the second month in a row in August as demand “moved closer to stagnation amid cost pressures and economic uncertainty”, according to the S&P Global/CIPS UK Construction Purchasing Managers’ Index.

The closely-watched measure says total industry activity came in at 49.2 last month, up fractionally from 48.9 in July, but still below the 50.0 no-change mark and so signalling a reduction over the month.

Across the three monitored categories in the sector, activity on housing projects increased for the first time in three months, albeit fractionally.

Civil engineering posted the sharpest decline, while commercial activity also fell, ending a period of growth stretching back for a year-and-a-half.

New orders increased only marginally in August, and to the least extent since June 2020, the report says. Some respondents indicated that customers were holding back on committing to new orders amid cost pressures.

The survey says: “Alongside inflationary pressures, concerns around the potential for a wider economic downturn also impacted the sector in August.”

It adds: “Construction firms scaled back their input buying for the first time since the initial wave of the Covid-19 pandemic, again reflecting signs of a slowdown.”

S&P Global Market Intelligence economics director Andrew Harker says: “The UK construction sector looks set to be in for a challenging period, according to the latest PMI data.

“Not only did construction activity fall for the second month running, but a range of indicators from the survey pointed to further weakness ahead. New orders slowed to a crawl, while concerns about the sector and the wider economy led to a drop in confidence.”

Chartered Institute of Procurement & Supply chief economist Dr John Glen adds: “There is some consolation for the sector as it readies itself for a future of high energy costs, however. Lower demand is leading to fewer purchases, downward pressure on input costs and more responsive supply chains.

“Together, these trends could eventually help to reverse inflation, but a prolonged dip in new orders will be a bitter pill for the sector to swallow.”

Naismiths director Gareth Belsham says: “Business confidence among construction firms, which typically provide a canary in the coal mine for the wider economy, continues to decline and August saw Britain’s builders reduce their orders for materials and scale back recruitment.

“This cooling of demand did ease some of the inflationary pressure though, and input cost inflation has now dipped to its lowest level for 18 months.

“Looking ahead, rising interest rates are likely to make some developers reassess their plans and will eventually cool demand from housebuyers too.”