Optimism builds over construction sector activity

1 October 2013

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2 October 2013 | Gurjit Degun

The UK construction industry grew for the fifth consecutive month in September, with optimism for the future reaching its highest level since April 2010.

The seasonally-adjusted Markit/CIPS Purchasing Managers’ Index slowed fractionally to 58.9 in September from a near six-year high of 59.1 during August. But the index was above the 50 baseline indicating growth for the fifth month running, and signalled a “sharp expansion of overall construction output”.

According to CIPS CEO David Noble, this has been the best quarter of growth in construction since the second quarter in 2010.

Residential construction was the strongest performing of the three sub-sectors, with the latest rise in output the fastest since November 2003.

Commercial building activity increased at the most marked pace since May 2012, while growth of civil engineering activity eased from August’s recent high. 

September saw greater purchasing activity in the sector. This was due to increased output and rising levels of client spending. But this higher level of input buying, for the fourth month in a row, placed strain on suppliers’ capacity, with delivery times lengthening to the greatest degree since August 1997.

Tim Moore, senior economist at Markit, said: “Construction is no longer the weakest link in the UK economy. The third quarter of 2013 ended with output growth riding high amid greater spending on infrastructure projects and resurgent house building activity.

“The reversal in fortunes has spanned commercial, residential and public sector construction projects. Moreover, builders are confident that a tide of new tender opportunities will continue to lift the construction sector in the months ahead, supported by improved development funding conditions and better underlying economic conditions.”

Noble added: “The construction sector is firing on all cylinders. Growth in the UK house building hit heights not seen for 10 years in September, and was supported by a solid acceleration in business from commercial construction, whilst growth in civil engineering remains well above the long run average, rounding off the best quarter of growth in construction since Q2 2010.

“Inevitably, purchasing levels have also increased, but the adverse effect of this is increased pressure on suppliers to meet growing levels of demand, to the extent that their performance deteriorated at the fastest rate for 16 years. 

“These pressures, along with increased cost burdens have the potential to act as a brake on the sector, but should not overshadow the overwhelmingly positive picture for UK construction.”

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