UK construction returns to growth

04 October 2016

UK construction output returned to growth in September for the first time in four months, according to the latest data collected by Markit/CIPS (Chartered Institute of Procurement & Supply) UK Construction PMI (purchasing managers’ index).

The report published by Markit/CIPS also noted that construction companies indicated a further recovery in their business expectations for the next 12 months, with optimism at its strongest since May.

At 52.3 in September, up from 49.2 in August, the seasonally adjusted Markit/CIPS UK Construction PMI came in above the 50.0 no-change value for the first time in four months.

The latest reading was well above July’s seven-year low and indicated the fastest rise in construction output since March. The pace of expansion was nonetheless still softer than the long-run survey average (54.6).

The report found that a solid rebound in residential activity was the key factor boosting overall construction output during September. It said the latest increase in housing activity was also the strongest recorded since January. It added that a number of companies cited resilient demand for residential building work and generally improving market conditions.

It said that construction companies pointed to a renewed rise in civil engineering activity, with the pace of expansion the fastest since March. Commercial construction activity decreased for the fourth month running, which is the longest period of sustained decline since early-2013. However, the latest fall was only modest and the slowest recorded since the downturn began in June.

Tim Moore, senior economist at IHS Markit and author of the Markit/CIPS Construction PMI, said, “UK construction companies moved back into expansion mode during September, led by a swift recovery in residential building from the three-and-a-half-year low recorded in June.

“Resilient housing market conditions and a renewed upturn in civil engineering activity helped to drive an overall improvement in construction output volumes for the first time since the EU referendum.

He added that a number of survey respondents said Brexit-related anxiety had lessened among clients, while it remained a factor behind the ongoing decline in commercial building work.

He said that construction companies appeared reasonably optimistic about the near-term outlook, with confidence linked to the fastest rise in new orders since March.

David Noble, group CEO at the Chartered Institute of Procurement & Supply, said, “Overall, the fastest rise in new orders for construction projects since April ended a four-month decline, and purchasing activity was at its highest since March.

“But, though there were modest rises in staffing levels, these were at one of the weakest rates in the last three years.”

Meanwhile, Randeesh Sandhu, CEO of Urban Exposure, a UK-based residential finance provider, said, “The increase in construction PMI is the second piece of positive news for the housebuilding sector this week.

“Sajid Javid’s (Secretary of State for communities and local Government) speech yesterday showed that this government is serious about addressing the UK housing shortage so we are encouraged that both activity in the sector and government policy are moving in the right direction at the same time.”

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