CIPS News


Slowest rise in UK construction output since July 2013

CIPS 5 January 2015

Strong overall rise in business activity during December...

Markit/CIPS UK Construction PMI® report shows slowest rise in UK construction output since July 2013  

- Strong overall rise in business activity during December...

- ...but the pace of growth eases for third month running

- Residential construction remains best performing area of activity

Robust overall output growth continued across the UK construction sector in December, but the strength of the recovery moderated further from the peaks seen earlier in the year. At 57.6, down from 59.4 in November, the seasonally adjusted Markit/CIPS UK Construction Purchasing Managers’ Index® (PMI®) signalled the least marked increase in construction output for 17 months. That said, the latest reading was higher than the long-run series average (54.5) and well above the 50.0 value that separates expansion from contraction.

December data highlighted divergent trends between the three broad categories of construction output monitored by the survey. House building activity remained the strongest performing sub-category, although the pace of expansion moderated to its least marked since June 2013. Commercial construction also increased at a solid pace, albeit slower than in the previous month. Meanwhile, civil engineering activity decreased slightly, thereby ending a 17-month period of continuous expansion.

Construction companies recorded a solid increase in new business volumes during December. Anecdotal evidence pointed to strong demand for new residential development and a continued recovery in tenders for commercial projects. However, the rate of overall new order growth slowed for the sixth successive month to its weakest since June 2013.  

Robust workloads and a sustained rebound in business activity contributed to a further sharp rise in staff recruitment at the end of the year. The rate of job creation was slightly less marked than in November, but still well above the survey’s historical average. Moreover, a number of firms highlighted worsening skill shortages across the construction sector. Reflecting this, sub-contractor availability decreased at a sharp and accelerated pace in December. Sub-contractor pay increased at the second-fastest pace since the survey began in April 1997 (exceeded only by November’s record high).

More than half of the survey panel (52%) anticipate a rise in business activity over the course of 2015, while only 13% forecast a reduction. Although the latest survey indicated strong underlying business confidence within the UK construction sector, the balance of firms expecting growth over the year ahead was the lowest recorded since August 2013. 


New-build housing was cited as a key area of growth, while uncertainty related to the General Election in 2015 was noted to have weighed on confidence.

Meanwhile, the construction sector experienced a moderation in cost inflation to its lowest for seven months in December, helped by falling oil-related prices. Strong supply chain pressures persisted at the end of 2014, but the latest deterioration in vendor performance was the least marked for 18 months.


Commenting on the report, David Noble, Group Chief Executive Officer at the Chartered Institute of Procurement & Supply, said: “The sector continues on its levelling path this month, with procurement and supply management professionals reporting continued strong growth but with a weaker trajectory than that seen in recent months.

“The sector is still expanding with the index posting at a higher level than the longer-term average, and led primarily by residential development - but it has become a victim of its own success as it struggles to keep up with its own speed of recovery. With increases in new business, comes pressures on the availability of talented staff and a squeeze on the performance of supply chains.

“Still replacing the skills lost in the recession and faced with increasing charges for the sub-contractors used to fill in the shortfall, the sector is enjoying lower commodity prices to balance out costs. As more new business comes in, so vendor performance is being affected and key raw material delivery times are lengthening.

“Levels of positive outlook remain high with 52% of respondents expecting a rise in business activity in 2015, though this month’s sudden drop in the strength of the civil engineering sub-sector and this year’s General Election is adding a note of caution.”

Contact Information

For economics comments, data and technical queries, please call:
Markit Press Office
Joanna Vickers, Corporate Communications
Telephone +44 207 260 2234
Email: joanna.vickers@markit.com

For industry comments, please call:
CIPS
Trudy Salandiak
Tel: +44 1780 761576
Email: trudy.salandiak@cips.org 

Notes to Editors

Where appropriate, please refer to the survey as the Markit/CIPS UK Construction PMI®. The Purchasing Managers' Survey is based on data compiled from monthly replies to questionnaires sent to purchasing executives in over 170 construction companies. The panel is stratified geographically and by Standard Industrial Classification (SIC) group, based on the regional and industry contribution to GDP. The survey is based on techniques successfully developed in the USA over the last 60 years by the National Association of Purchasing Management. It is designed to provide one of the earliest indicators of significant change in the economy, being issued on the first working day of each month. The data collected are not opinion on what might happen in the future, but hard facts on what is actually happening at "grass roots" level in the economy. As such the information generated on economic trends pre-dates official government statistics by many months. Markit do not revise underlying survey data after first publication, but seasonal adjustment factors may be revised from time to time as appropriate which will affect the seasonally adjusted data series. Historical data relating to the underlying (unadjusted) and seasonally adjusted numbers are available to subscribers from Markit. Please contact economics@markit.comAbout MarkitMarkit is a leading global diversified provider of financial information services. We provide products that enhance transparency, reduce risk and improve operational efficiency. Our customers include banks, hedge funds, asset managers, central banks, regulators, auditors, fund administrators and insurance companies. Founded in 2003, we employ over 3,000 people in 10 countries. Markit shares are listed on NASDAQ under the symbol “MRKT”. For more information, please see www.markit.com

About PMI

Purchasing Managers’ Index® (PMI®) surveys are now available for 32 countries and also for key regions including the Eurozone. They are the most closely-watched business surveys in the world, favoured by central banks, financial markets and business decision makers for their ability to provide up-to-date, accurate and often unique monthly indicators of economic trends. To learn more go to www.markit.com/economics.

About CIPS

The Chartered Institute of Procurement & Supply (CIPS) is the world’s largest procurement and supply professional organisation.  It is the worldwide centre of excellence on purchasing and supply management issues.  CIPS has a global community of 106,000 in 150 countries, including senior business people, high-ranking civil servants and leading academics.  The activities of procurement and supply chain professionals have a major impact on the profitability and efficiency of all types of organisation and CIPS offers corporate solutions packages to improve business profitability.

The intellectual property rights to the UK Construction PMI® provided herein are owned by or licensed to Markit Economics Limited. Any unauthorised use, including but not limited to copying, distributing, transmitting or otherwise of any data appearing is not permitted without Markit’s prior consent. Markit shall not have any liability, duty or obligation for or relating to the content or information (“data”) contained herein, any errors, inaccuracies, omissions or delays in the data, or for any actions taken in reliance thereon.  In no event shall Markit be liable for any special, incidental, or consequential damages, arising out of the use of the data. Purchasing Managers' Index™ and PMI™ are either registered trade marks of Markit Economics Limited or licensed to Markit Economics Limited. CIPS use the above marks under license. Markit is a registered trade mark of Markit Group Limited.

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