According to the most recent figures, output in the UK construction sector increased for the first time since May, with housebuilding leading the way.
The Markit/CIPS UK Construction Purchasing Managers’ Index (PMI) climbed above the 50.0 no-change value for the first time in four months, reaching 52.3 and well above July’s seven-year low in the ninth month of the year, as business activity across the sector improved, with the fastest increase in new orders in six months.
Client confidence has improved, and the Brexit-related uncertainty has lessened the drag on demand, according to survey respondents. Construction firms indicated a further recovery in their business expectations for the next 12 months, with optimism at its highest level since May.
Just under half of the survey panel (45%) anticipates an increase in output in the coming year, while only 9% anticipate a decrease. However, confidence remained lower than it had been at the start of 2016.
The key factor boosting overall construction output in September was a solid rebound in residential activity, with the increase in housing activity being the strongest since January.
Construction firms reported a resurgence in civil engineering activity, with the rate of expansion accelerating to its fastest since March.
Commercial construction activity fell for the fourth month in a row, marking the longest period of continuous decline since early 2013. However, the most recent drop was only modest and the slowest since the downturn began in June.
“UK construction companies moved back into expansion mode during September, led by a swift recovery in residential building from the three-and-a-half year low recorded in June,” said Tim Moore, senior economist at IHS Markit and author of the Markit/CIPS Construction PMI.
“For the first time since the EU referendum, resilient housing market conditions and a renewed upturn in civil engineering activity aided in driving an overall improvement in construction output volumes.”
“A number of survey respondents reported that client anxiety about Brexit has subsided, though it remains a factor in the ongoing decline in commercial building work.”
“Construction firms appear reasonably optimistic about the near-term outlook, with confidence linked to the fastest increase in new orders since March and a generally more upbeat economic newsflow.”
“However, the sector remains on a much weaker growth trajectory than seen at the beginning of 2016, which contrasts with the export-led surge in manufacturing production in September.”
“Not only are UK construction firms feeling the effects of lower investment spending compared to earlier this year, but the weak pound has also contributed to a sharp acceleration in cost inflation.”
Randeesh Sandhu, CEO of Urban Exposure, a residential finance provider, commented on the latest Construction PMI, saying that the increase is the second piece of good news for the housebuilding sector this week.
“Sajid Javid’s speech yesterday demonstrated that this government is committed to addressing the UK housing shortage, so we are encouraged that both sector activity and government policy are moving in the right direction at the same time.”
“While some indicators, such as recent BBA mortgage lending figures, show that lending is now down 10% since May and has fallen for three months in a row, the combination of clear government support for SME developers and improving confidence bodes well for the sector moving forward.”