UK construction growth continues_2

2 June 2010

2 June 2010 | Lindsay Clark

The UK construction sector enjoyed its third month of growth in May, with activity increasing at its strongest rate since September 2007, according to the latest PMI.

The seasonally adjusted Markit/CIPS Construction Purchasing Managers’ Index, where a score of 50 represents no change on the previous month, reached 58.5, rising slightly from the April reading of 58.2. Rising new orders drove the increase in activity, which also led to growth in employment for the first time in two years.

Sarah Ledger, economist at Markit and author of the UK Construction PMI, said although overall growth – and expansion in activity in all three sub-sectors of housing, commercial and civil – was encouraging, caution regarding the future was necessary. “It is unlikely that the current rate of growth will be maintained over the medium-term,” she said. “This partly reflects the low base from which expansion is being built, but also the uncertainty surrounding cuts in public spending.”

The UK government is set to cut spending on projects including school and hospital building, which will hit the construction sector. Details are likely in the emergency budget on 22 June.

Commenting on the PMI report, David Noble, chief executive at CIPS, said: “What is clear is that recovery in construction is creating a ripple effect across the economy as firms supplying the industry benefit from increased purchasing activity.

“Purchasing managers say that on the surface things are looking positive with recent growth accelerating and more jobs on the horizon. However, the recovery is so fragile that it will be extremely vulnerable to the impending public sector cuts and it is unclear whether the recovery is robust enough to cope with such knock-backs. The cuts are clearly coming and it’s not long before we will start to see them making their mark.”

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