UK construction hits 5 month high

The construction sector activity in the UK economy rebounded sharply in November and came in at the highest levels in five months, according to a new report from Markit Economics.

The latest monthly survey of construction purchasing managers indicates that new orders and employment numbers also increased more than they had done in recent five months. However, the improvement in construction growth was largely confined to residential work. Commercial and civil engineering activity continue to decline. Business optimism has picked up from October’s near five-year low to its strongest rate since June.

Tim Moore, Senior Economist at IHS Markit and author of the Markit/CIPS Construction PMI®, noted: “UK construction companies experienced a solid yet uneven improvement in business conditions during November. Once again, resilient house building growth helped to offset lower volumes of commercial work and civil engineering activity. “Survey respondents noted that residential projects underpinned the rebound in total new order growth to its strongest since June, helped by strong demand fundamentals and a supportive policy backdrop.”

Construction companies indicated a moderate rebound in new orders in November, with the rate of expansion the fastest for five months. Anecdotal evidence cited a general improvement in client demand after the soft patch this summer. Higher levels of new work helped to support a moderate rise in staff numbers and input buying in November.

Duncan Brock, director of customer relationships at the Chartered Institute of Procurement & Supply, said: “At last the construction sector, has picked its feet up with the biggest overall improvement in five months, underpinned by a moderate rise in new orders, but the strongest since June. It appears that policy support and a small recovery in the UK economy has boosted sentiment and encouraged clients to come out of their shells and start building again. The housing sector was the primary driver of growth increasing at the fastest rate for almost half a year. However it is private sector companies that need to commit to big ticket spending, with commercial development still underperforming as persistent Brexit uncertainty continues to bite. Concerns over civil engineering in particular are also prevalent with its downward course the longest since 2013 and linked to a shortfall of new tender opportunities. Across construction supply chains, delivery times have been under pressure, as materials were in higher demand, while stocks remained in short supply. Lead-times from vendors have now deteriorated in every month for over seven years. Overall, the sector showed an incremental improvement, but business optimism was on the rise and up from last month’s five-year low. Perhaps the darkest days are behind the sector with fresh impetus on the horizon for the New Year.”

For the full report please go here