Civil engineering drives UK construction growth

3 May 2017

Work on civil engineering projects and residential building activity has driven the sharpest rise in total construction output so far this year, the latest PMI reveals.

The Markit/CIPS UK Construction Purchasing Managers’ Index found civil engineering has expanded at its fastest pace for 13 months, while suppliers’ lead times have lengthened to the greatest extent since June 2015.

A resilient economic backdrop and a sustained improvement in client demand has led to the strongest upturn in incoming new work so far this year.

Employment numbers have continued to rise and the most marked rise in input buying since November 2016 has been seen due to greater workloads.

Robust demand for construction materials and upward pressure on costs from a depreciated sterling caused another steep increase in input prices during April.

At 53.1, up from 52.2 in March, the PMI indicated a solid rise in overall construction output, well below the post-crisis peak seen in January 2014 of 64.6, but still rising at the fastest rate so far this year. A reading of 50 signals no change.

The top performing subcategory of construction activity was civil engineering, which grew at its fastest rate since March 2016.

Residential building accelerated and reached a four-month high while commercial building work increased only slightly and at a slower rate than March.

Job creation across the construction sector grew at its strongest since May 2016 due to high volumes of new work, with respondents indicating signs of challenges in recruiting skilled labour.

The sustained upturn in new work also increased demand for construction materials, which in turn contributed to a sharp and accelerated deterioration in vendor performance.

Average cost burdens increased sharply though the rate of inflation and higher prices were linked to exchange rate factors, as well as increased energy and fuel costs.

Nearly half of survey respondents (49%) expect a rise in construction output over the year – while 10% expected it to fall.

And while the degree of confidence was down from March it was still well above the post referendum low of July 2016.

Duncan Brock, director of customer relationships at CIPS, said: “With the biggest rise in new orders since the beginning of the year, the sector is in a strong pre-election position buoyed up by a hardy UK economy and strong client confidence.

“The housing sector offered up the best news recovering from last month’s minor blip and building on its strongest performance since the end of last year.”

Brock said the government must take extra steps to ensure the General Election does not knock the sector back into a period of uncertainty.

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