Newly released data for March from the IHS Markit/CIPS UK Construction Purchasing Managers’ Index (PMI) revealed a sharp fall in output from 51.4 in February to 47.0, to register below the 50.0 no-change threshold for the first time in six months. Moreover, the latest reading signalled the fastest overall decline in construction output since July 2016. March 2018’s figure was weaker than the average 52.3 of 2017.

Where a drop in work was reported, survey respondents noted that unusually bad weather had disrupted staff availability and activity on site. The overall reduction in construction output was driven by the sharpest drop in civil engineering work for five years in March. Commercial activity also decreased during the latest survey period, with the rate of decline the most marked since September 2017. Housing bucked the wider trend for construction activity in March, although the latest upturn in residential building was only marginal.

Construction companies indicated a decline in new business volumes during March, which continued the downward trend seen so far in 2018. The latest deterioration in new order books was the sharpest since July 2016. Survey respondents noted that subdued underlying demand and, in some cases, weather-related disruption had weighed on sales in March. Despite a sustained soft patch for new work, latest data revealed that employment growth accelerated to a three-month high. Additional staff hiring was attributed to forthcoming project starts and long-term business expansion plans.

At the same time, subcontractor availability continued to decline, which contributed to the strongest rise in their average prices charged since September 2017. Higher raw material costs continued in March, which construction firms linked to increased prices for metals and insulation in particular.

Nonetheless, the overall rate of input cost inflation softened to a 20- month low. Some survey respondents cited a moderation in supplier price rises linked to the weak pound. Meanwhile, construction firms indicated that supplier lead-times lengthened to the greatest degree since last July. This was attributed to a combination of stretched supply chain capacity, alongside transport delays following adverse weather in March.

Tim Moore, associate director at IHS Markit and author of the IHS Markit/CIPS Construction PMI, said: “The construction sector continued to experience subdued business conditions during March, but snow-related disruption was a key factor behind the marked decline in activity on site reported by survey respondents.

“Total construction output fell at the fastest pace since July 2016, driven by the sharpest reduction in civil engineering activity for five years and a renewed fall in commercial work. House building increased slightly during March, although the rate of expansion was still softer than at any time in 2017.

“A solid rise in employment numbers and the rebound in business expectations to a nine-month high provide an indication that construction activity will strengthen over the near-term. However, survey respondents noted that underlying demand remains constrained by heightened economic uncertainty and risk aversion among clients.”

While the unusually bad weather conditions had a particularly negative impact on construction output, the FMB said other factors had also contributed to the decrease.

Brian Berry, chief executive of the FMB, said: “The latest PMI data shows the fastest drop in construction activity since July 2016. The unusually cold and snowy weather experienced across the UK last month is partly to blame for this set-back. The cold snap impacted on a broad array of construction projects, including house building, domestic refurbishment and large civil engineering projects. Many small builders across the country were forced to close sites for more than a week and some employers reported that it was too cold to lay bricks.

“Alongside the snow, the cost of doing business is rising for the UK’s construction firms. Wages and salaries are all rocketing because of the ever worsening skills shortages in construction. What’s more, material prices have been rising steadily since the depreciation of sterling following the EU referendum. Increased prices for metals and insulation in particular were noted in March. We expect material prices to continue to cause a headache for the construction industry with recent research from the FMB showing that 87% of builders believe that material prices will rise in the next six months.”

Berry added: “More broadly, the future is still looking incredibly uncertain for the UK construction sector. We still don’t know what the post-Brexit immigration system will look like and given that businesses need to plan ahead, this could also be putting a brake on growth in the construction sector. This is especially the case for construction – our sector is heavily reliant on EU tradespeople with more than 8% of construction workers hailing from the EU. In London, this rises to one third. The government must take stock of today’s results and redouble its efforts to provide post-Brexit clarity to businesses. We need to know what we can expect from the new immigration system – we need to know what will replace free movement of people.”