Optimism in UK construction sector highest since 2004

Will Green is news editor of Supply Management
2 July 2015

The UK construction sector grew at its fastest rate for four months in June, according to a survey of buyers.

The Markit/CIPS UK Construction Purchasing Managers’ Index climbed to 58.1 in June, compared to 55.9 in May and above the 50 mark indicating expansion.

Residential building was the fastest growing sector but there was an upturn in both commercial and civil engineering activity over the month.

Firms reported improving demand from clients and strong order books, while business optimism was higher than it has been since February 2004, with almost two-thirds of respondents predicting a rise in output over the next 12 months.

Increased staff recruitment and greater workloads led to a sharp increase in purchasing activity, which in turn contributed to a marked deterioration in supplier performance and lead times lengthening to the greatest degree since March.

Input price inflation also accelerated to a three-month high and a number of firms linked higher prices to stock shortages at vendors.

David Noble, group CEO, CIPS, said: “If there was a downside to this upturn it was the burden on suppliers to keep pace with rising need as lead times experienced the greatest lengthening since March 2015 and stock levels were depleted from this higher demand.”

Tim Moore, senior economist at Markit, said: “The extent of the recent rise in construction optimism is partly down to relief that pre-election uncertainty has now passed, but it also suggests that firms are infused with confidence that underlying demand will continue to recover.

“Scorching hot demand for some construction products placed additional pressure on supply chains in June, with delivery times lengthening again for a wide range of materials. Meanwhile, another substantial rise in subcontractor charges highlighted that persistent skill shortages in the construction sector are contributing to sharp rises in labour costs in some areas.”

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