Construction lifted with ''nervous optimism''

2 February 2011
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2 February 2011 | Angeline Albert 

Activity in the UK construction sector grew in January thanks to improved weather conditions and a lift in new orders.

However, the outlook was described as one ofnervous optimism” given that a rise had been expected to follow disruption in December.

The Markit/CIPS UK Construction Purchasing Managers' Index (PMI) said the past month witnessed a modest rise in activity, with the PMI posting 53.7, up from 49.1 in December.

For the first time since August 2010, all three UK construction sub-sectors recorded a rise. Civil engineering was the strongest; commercial-based construction activity extended its period of growth to 11 months; and ending a four-month period of contraction, there was a slight increase in house building.

Increased tender opportunities and contract wins boosted new order volumes. However, despite rises in both activity and new orders, employment fell again in January for the seventh successive month. Sub-contractor usage also declined over the month, falling at the sharpest rate since October 2009. Rates charged by sub-contractors also fell.

Although optimism among UK construction companies is at its strongest in eight months, concerns remain over cuts in public spending.

Chris Williamson, chief economist at Markit said: “After estimating for the boost to activity in January resulting from the disruption to workflows in December, the underlying growth trend remains only very modest and well below the surging pace seen in the second quarter of last year.

“Looking at the trend in recent months, the housing market seems to be a particular area of weakness, with house building stagnating at best. The outlook appears to be one of nervous optimism. This nervousness about future prospects was highlighted by a disappointing further reduction in employment.”

CIPS CEO David Noble, said:“Despite the growth of activity, an air of caution persists among construction companies as employment levels continue to fall. Some companies that are doing well are hiring but many more are continuing to adjust to lower workloads and deferral of projects. Until growth becomes sustained it is unlikely we will see employment levels rise substantially and consistently.”

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