UK construction growth continues

4 April 2006
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05 April 2006

The UK Construction industry's rate of expansion accelerated for the second consecutive month in March, according to the latest CIPS purchasing managers' index report.

The seasonally adjusted index, where a reading above 50 indicates growth, revealed the industry had turned a corner since January when the rate of expansion slumped to its slowest pace in 50 months.

In March the index posted its highest reading for six months at 54.7, well above the 51.9 recorded in February. Growth in home-building proved to be the strongest since December 2003 - the housing activity index posting a reading of 59.6, compared with 52.9 last month.

Volumes of business received by UK constructors rose at its fastest pace for four months, with the new orders index recording a level of 56.5 - up from 54.6 in February and 52.2 in January. According to the report, invitations to tender had risen, resulting in a greater number of new contracts being secured.

Employment levels at UK construction firms also rose at their sharpest rate for 16 months. The employment index posted a reading of 55.5, an increase on February's 53.4, indicating an expanding workforce to cope with increasing workloads. Increased invitations to tender were also said to be driving the recruitment of administrative staff to oversee bids for new contracts.

However, the report blamed high oil prices and increased energy costs for the strong rate of inflation, although it eased to a four-month low in March.

Despite this, the influx of recent and expected new orders means UK constructors still remain "highly optimistic" about the future, with the future business activity index posting a reading of 75.7.

Roy Ayliffe, CIPS director of professional practice, said the accelerated growth in construction activity signalled a positive outlook for the UK construction market, "particularly with the increase in new orders and employment fuelling the optimism being seen by purchasing managers." He added: "High oil and energy prices again affected input costs which, despite the rate of inflation reaching a four-month low, means that the sector looks set to face higher input costs for some months yet."


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