Construction activity recovered in August, reversing most of the slump seen in the immediate aftermath of the Brexit vote.

Output fell for a third month, but the pace of decline slowed markedly. The construction PMI (pdf) from Markit/CIPS jumped to 49.2 in August from 45.9 in July. The reading was better than the 46.1 figure expected by City economists. The 50 mark separates growth from contraction: anything below indicates contraction.

Tim Moore, senior economist at Markit and author of the Markit/CIPS Construction PMI, said: “The downturn in UK construction activity has eased considerably since July, primarily helped by a much slower decline in commercial building. Construction firms cited a nascent recovery in client confidence since the EU referendum result and a relatively steady flow of invitations to tender in August.

“However, the latest survey indicates only a partial move towards stabilisation, rather than a return to business as usual across the construction sector. There were still widespread reports that Brexit uncertainty had dampened demand and slowed progress on planned developments, especially in relation to large projects.”

New order volumes continued to fall during August, which contrasts with the three-year run of sustained growth seen before May.

UK construction activity. Illustration: Markit/CIPS

Mike Chappell, of Lloyds Bank commercial banking, said: “The past month has seen a number of the bigger players in the sector report robust results with a relatively upbeat outlook, suggesting there may have been less negative impact from the EU referendum result than was originally feared, at least at the top of the market.

“The order books of larger firms, many of which benefit from diversified revenue streams, appear to be in good shape, while several have either increased or restored their dividends. That said, anecdotal evidence indicates those further down the chain – such as mid-tier contractors and SMEs – are less bullish and more likely to adopt a ‘wait-and-see’ approach.”

Chappell said businesses would be following closely the various data to better gauge the health of the economy. “Firms are also thinking about the chancellor’s upcoming autumn statement when they will learn whether their hopes of an increase in infrastructure spending are to become a reality.”

The improvement in construction comes a day after the equivalent survey for manufacturing showed a strong bounceback in factory output and new orders in August, suggesting manufacturers quickly shrugged off the shock of the Brexit vote in June.

Consumer confidence also recovered somewhat last month after taking a huge plunge in July, according to market researchers GfK. The Bank of England took action in early August to restore confidence among businesses and households and ward off a recession. It cut interest rates to a new record low of 0.25% and expanded its programme of bond purchases.