UK construction’s ‘solid expansion’

04 December 2018

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A “solid expansion” of the UK’s construction output has been reported by the IHS Markit/CIPS UK Construction PMI (Purchasing Managers’ Index), and this growth was said to be supported by a broad-based upturn in the three sub-categories of activity monitored by the survey.

November data showed growth of new work picked up since October and rising client demand that was said to have underpinned “a robust and accelerated expansion of employment”. The rate of job creation was the fastest since December 2015, the survey found.

However, it also found that business confidence had remained relatively subdued, with survey respondents noting that concerns about Brexit (the UK’s decision to leave the EU) weighed on their growth projections for the next 12 months.

The seasonally adjusted IHS Markit/CIPS UK Construction Total Activity Index registered 53.4 in November, up from 53.2 in October, to remain above the crucial 50.0 no-change mark for the eighth successive month.

In fact, the latest reading signalled the strongest rate of business activity expansion since July.

Residential building reclaimed its position as the fastest growing area of construction work in November. The latest rise in house building activity was the strongest for three months. Latest data also pointed to sustained increases in commercial work and civil engineering activity.

Survey respondents noted that rising client demand continued to boost construction output during November.

New business

The rate of new business growth was found to have picked up since October, but it remained softer than seen on average. Some construction firms noted that Brexit uncertainty had held back new order growth, while there were also reports citing delays to public sector spending decisions.

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Higher levels of new business contributed to a solid expansion of input buying and rising employment numbers during November. The latest increase in staffing levels was the fastest since December 2015.

Meanwhile, greater demand for construction products and materials contributed to worsening vendor performance, the survey showed. Longer delivery times from suppliers have been reported in each month since September 2010.

The latest data indicated that business optimism across the construction sector rebounded from the near six-year low seen in October, with the latest reading signalling the strongest degree of confidence for three months.

Anecdotal evidence suggested that Brexit-related concerns remained the main factor weighing on business optimism during November.

Duncan Brock, group director at the UK’s Chartered Institute of Procurement & Supply (CIPS) said, “After last month’s disappointing levels of business optimism, the construction sector perked up marginally in November. There was good activity across all the sub-sectors and residential building reclaimed its leader-of-the-pack status with the strongest performance of all three.

“Constrained supply chains were still underperforming as supplier operations worsened again and to their weakest level for three months. Suppliers reduced their stock levels and reports of raw material shortages gnawed away at efficiency. Adding to this challenging mix, prices for raw materials continued their strong upward trajectory, so the pathway ahead is still far from clear of blockages, Brexit-related or otherwise.”

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