Construction output rising

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The latest IHS Markit/CIPS UK Construction PMI® figures reveal that construction output is rising at its fastest pace for five months.

Released this week, the latest survey indicates shows that residential building has driven the figures up, casting a more optimistic glow across the sector. This is also reflected in employment numbers, which increased the greatest extent in five months.

However, work in the civil engineering and commercial sectors has once again fallen. These sustained reductions are particularly worrying, with civil engineering experiencing its longest period of decline since early 2013.

Adjusted for seasonal influences, the IHS Markit/CIPS UK Construction Purchasing Managers’ Index® (PMI®) picked up from 50.8 in October to 53.1 in November, leaving it above the 50.0 no-change value for the second month running.

The latest results show a solid rate of business growth, perhaps heralding a return of confidence in the sector. This can only be boosted by the government’s influence over the civil sector, where the new National Infrastructure and Construction Pipeline promises some £600Bn of investment over the next four years.

Survey respondents have suggested that the strong housing sector is reflective of government policy and support for the sector is driving an accelerated upturn.

Commercial construction was once again the weakest performing sector in November, continuing the trend seen so far in 2017. Again, respondents felt that the political uncertainty and economic backdrop has held back spending in the sector and Brexit is still affecting confidence.

Civil engineering activity also fell. With a third successive month of decline, the sector is experiencing  the longest phase of decline seen for over four years. Respondents, however, feel the drop is only marginal and will be rejuventated by major infrastructure programmes.

Tim Moore, Associate Director at IHS Markit and author of the IHS Markit/CIPS Construction PMI® commented : “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 firms reported that heightened economic and political uncertainty continued to hold back commercial development activity. The latest drop in civil engineering was linked to a recent lack of tender opportunities for infrastructure-related projects.

“Business optimism across the construction sector remained relatively subdued, but picked up from the near five-year low seen in October. This represented the first improvement in confidence for three months, which construction firms attributed to increased sales enquiries and hopes that risk aversion among clients will recede over the course of next year.”

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.”

 

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