UK construction sector remains ‘in expansion mode’

Markit

MarkitOctober data has highlighted another upturn in overall UK construction output, alongside a rebound in new order growth and the fastest pace of job creation for almost a year. Commercial building work was a key growth driver in October, as housing and civil engineering activity both expanded at slower rates than in September. Despite a robust and accelerated rise in input buying, latest data indicated the lowest strain on supplier delivery times for almost five years. Meanwhile, relatively subdued cost inflation continued in October, helped by falling raw material prices (especially metals).

The headline seasonally adjusted Markit/CIPS UK Construction Purchasing Managers’ Index (PMI) registered 58.8 in October, which was down from 59.9 in September but still well above the 50.0 no-change threshold. As a result, the latest survey marked two-and-a-half years of sustained output growth across the UK construction sector. While the pace of expansion remained weaker than seen on average in 2014, the latest reading was comfortably above the pre-election low recorded in April (54.2). Higher levels of activity were recorded across all three broad categories of construction monitored by the survey. However, housing activity growth eased from September’s 12-month high, and the latest rise in civil engineering was the slowest since May.

Commercial building work increased at the sharpest pace for eight months.

Reports from survey respondents suggested that greater output volumes reflected a strong pipeline of work-in-hand, alongside faster new order growth over the month. The latest rise in incoming new work was the steepest since October 2014, with construction companies highlighting new project wins from both public and private sector clients.

Looking ahead, construction companies remain highly upbeat about their prospects for growth over the next 12 months, with more than half (59%) forecasting a rise in business activity and only 7% expecting a decline. Anecdotal evidence cited an encouraging number of new invitations to tender and expectations of solid spending levels among key clients.

Tim Moore, senior economist at Markit and author of the Markit/CIPS Construction PMI, said: “October’s survey indicates that the UK construction sector remains firmly in expansion mode, although commercial building work was the only category to experience faster growth than in September.

“Another relatively buoyant construction PMI reading indicates that the sector remains in rude health. Rather than acting as a drag on the economy, as suggested by recent GDP estimates, the sector is continuing to act as an important driving force behind the ongoing UK economic upturn.

“Construction companies also noted a rebound in new business flows during October and responded to rising workloads by taking on extra staff at the fastest rate for almost a year. Shortages of skilled staff persisted as a result, with the current period of falling sub-contractor availability the longest seen in over a decade.”