UK construction sector returns to growth

2 August 2012

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2 August 2012 | Adam Leach

Activity in the UK construction sector returned to growth last month, with the strength of commercial activity making up for the lacklustre performance in residential and civil engineering.

The Markit/CIPS UK Construction PMI for July reported a figure of 50.9, where a figure above 50 indicates an expansion in activity, marking a return to growth from June’s figure of 48.2. Although an improvement, it only indicates slight growth.

Activity only expanded in one of the subsectors measured. Civil engineering experienced its second fastest decline since September 2011, and companies across the sector reported a decline in incoming new business at the second-fastest rate since January 2010. The report suggested this decline in new orders had provoked a drop in purchasing activity at their organisation.

There were also signs that the London 2012 Olympics were starting to hamper performance. Supplier delivery times lengthened during the month, with some respondents attributing the delays to longer delivery times in and around London resulting from Games activity. Input prices increased again, marking two-and-a-half years of consecutive rises. But the rate of the rise was slight and lower than the recent run of increases.

“July’s survey offered little sign of an imminent rebound in the UK construction sector, with total activity rising only marginally after well documented temporary factors had weighed on output last month. Another drop in new orders, alongside wet weather conditions, meant a soft platform from which construction output could bounce in July,” said Tim Moore, senior economist at Markit.

David Noble, CEO at CIPS, said: “Last month’s construction performance was so bad that this month there was hope for a positive turnaround. There was some progress, with a slight boost in performance, but the external operating environment remains depressed. While the modest growth in July has been driven by the commercial sector, housing and civil engineering continue to lag.”

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