UK construction sector recovery 'down but not out'

2 December 2015

The construction industry is optimistic about the future despite a slowdown in output growth in November.

Residential building activity increased as its weakest pace since June 2013 and civil engineering rose at the slowest rate for six months – making it the worst performing category, according to the latest Markit/CIPS UK Construction Purchasing Managers’ Index.

The overall PMI score – where anything above 50 indicates growth – fell from 58.8 in October to 55.3 – its lowest reading since April.

Although commercial construction work topped the growth table, the latest expansion was less marked than October’s eight-month high, the report said.

More than half of the construction purchasing executives surveyed (55 per cent) remained upbeat, forecasting a rise in output over the year ahead, while only 5 per cent anticipated a fall.

“Suppliers continued to struggle this month, citing shortages in key materials, supply chain capacity and skilled capability as the causes,” said David Noble, group CEO, CIPS. “But there is a question mark over the coming months as the housing sector, normally the star performer, may drag back on recovery, along with the lack of availability of skilled staff.

“Though there will inevitably be some disappointment that last month’s strong activity has largely petered out, the sector still operates in a positive environment of low interest rates, low inflation and lower commodity prices, which has been reflected by respondents’ continued optimism for a good future.”

Tim Moore, senior economist at Markit, described the UK construction recovery as “down but not out”.

“Overall the latest results suggest that construction companies have become a little more cautious towards year-end, especially in terms of job hiring,” he said. “However, a healthy flow of new tenders from public and private sector clients is expected to provide a tailwind to growth heading into 2016.

“Reflecting this, UK construction firms were again overwhelmingly positive about the outlook for their business activity, while only a small proportion anticipates falling output levels during the next 12 months.”

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