Growth returns to UK construction sector

Adam Leach is a freelance business journalist
4 June 2013

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Activity in the UK construction sector expanded for the first time in six months in May, with stronger demand for residential building.

The Markit CIPS UK Construction PMI recorded a figure of 50.8 for the month, up from April’s figure of 49.4. This reading above 50 marked the first month of increased activity for the sector since November 2012. The return to growth came largely as a result of an increase in house building, with work rising at the fastest rate for 26 months, as both civil engineering and commercial output dropped.

Improved fortunes were also reported across new business, the first improvement for a year. Respondents to the survey also adopted a more optimistic outlook with 40 per cent predicting a rise in output over the next 12 months, compared to just 13 per cent predicting a drop.

On a less positive note, vendor lead times lengthened once again, with the survey results indicating it was the most substantial change since September 2007. Input costs also continued to increase as the rate of inflation for the May marked the highest of 2013 so far.

Tim Moore, senior economist at Markit, said: “UK construction output appears to have finally pulled out of a tailspin in May, but the latest figures suggest that the sector is worryingly reliant on residential building work for thrust. Construction firms cited improving house building activity as the key factor behind a rise in new orders for the first time since May 2012. Meanwhile, shrinking spending on both commercial and civil engineering projects acted as a drag on overall new business growth.

David Noble, CEO at CIPS, said: “The government’s attempts to boost house building has given months of lacklustre growth a shot in the arm, but the continued decline in civil engineering can be largely attributed to the lack of public sector projects, which show no sign of increasing. This, coupled with poor performance in the commercial sector, means house building alone is driving industry growth.”

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