The UK construction industry saw growth slow down in August as firms warned of a lack of new work.

The closely followed IHS Markit/CIPS construction purchasing managers’ index (PMI) hit a reading of 54.6 last month, compared to 58.1 in July.

Any reading above 50 represents an expansion in business activity.

Tim Moore, economics director at IHS Markit, said: “The latest PMI data signalled a setback for the UK construction sector as the speed of recovery lost momentum for the first time since the reopening phase began in May.

“House building remained the best performing area of construction activity, with strong growth helping to offset some of the weakness seen in commercial work and civil engineering activity.

“The main reason for the slowdown in total construction output growth was a reduced degree of catch-up on delayed projects and subsequent shortages of new work to replace completed contracts in August.”

Housing activity drove growth the period, with the housebuilding sector reporting a 60.7 reading, compared to a 52.5 reading for commercial activity and 46.6 reading for civil engineering.

The report revealed that new business volumes increased for the third consecutive month but slowed dramatically from July.

Construction companies said that “economic uncertainty and a wait-and-see approach among clients” had limited opportunities to secure new contracts.

Firms also reported a further decline in staffing numbers over the month, although the rate of job shedding “eased slightly” since July.

However, companies reported an improvement in their outlook, with 43% of survey respondents saying they expect a rise in output over the next year, compared to only 19% predicting a fall.

Duncan Brock, group director at the Chartered Institute of Procurement & Supply, said: “Even with all these obstacles, builders were at their most optimistic since the beginning of the year.

“This glass-half-full attitude will have to carry companies into the autumn as the UK economy remains delicate and susceptible to more turbulence.”