Residential Housebuilding Helps Construction Sector Grow First Time May

Output in the UK’s construction sector has risen for the first time since May, according to the latest figures, with housebuilding leading the way in September.

For the first time in four months, the Markit/CIPS UK Construction Purchasing Managers’ Index (PMI) climbed above the 50.0 no-change value, reaching 52.3 and well above July’s seven-year low in the ninth month of the year, as business activity across the sector saw an upturn with the fastest increase in new orders for six months.

Survey respondents cited improving confidence among clients and a reduced drag on demand from Brexit-related uncertainty. Reflecting this, construction firms indicated a further recovery in their business expectations for the next 12 months, with optimism the strongest since May.

Just under half of the survey panel (45 per cent) forecast a rise in output over the year ahead, while only nine per cent anticipate a reduction. However, the degree of confidence remained softer than that seen at the start of 2016.

A solid rebound in residential activity was the key factor boosting overall construction output during September with the increase in housing activity the strongest recorded since January.

Construction companies pointed to a renewed rise in civil engineering activity, with the pace of expansion the fastest since March.

Commercial construction activity decreased for the fourth month running, which is the longest period of sustained decline since early-2013. However, the latest fall was only modest and the slowest
recorded since the downturn began in June.

Tim Moore, senior economist at IHS Markit and author of the Markit/CIPS Construction PMI said: “UK construction companies moved back into expansion mode during September, led by a swift
recovery in residential building from the three-anda-half year low recorded in June.

“Resilient housing market conditions and a renewed upturn in civil engineering activity helped to drive an overall improvement in construction output volumes for the first time since the EU referendum.

“A number of survey respondents noted that Brexitrelated anxiety has receded among clients, although it remained a factor behind the ongoing decline in commercial building work.

“Construction firms appear reasonably optimistic about the near-term outlook, with confidence linked to the fastest rise in new orders since March and a more upbeat economic newsflow in general.

“However, the sector remains on a much weaker growth trajectory than seen at the start of 2016, which contrasts with the export-led surge in manufacturing production during September.

“Not only are UK construction companies feeling the impact of subdued investment spending relative to earlier this year, but the weak pound has contributed to a sharp acceleration in cost inflation.

Randeesh Sandhu, CEO of Urban Exposure, the residential finance provider comments on the latest Construction PMI said the increase in construction PMI is the second piece of positive news for the housebuilding sector this week.

“Sajid Javid’s speech yesterday showed that this government is serious about addressing the UK housing shortage so we are encouraged that both activity in the sector and government policy are moving in the right direction at the same time.

“While some indicators such as recent BBA mortgage lending figures, which found that lending is now down 10% since May and has fallen for three months in a row, point towards a slowdown, the combination of clear government support for SME developers and improving confidence bodes well for the sector going forward.”

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Last Updated on April 24, 2021
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