UK Construction Sector Continues To Grow

Demand for new hotels, offices, shops, accommodation and other buildings may be strong at present in Britain. The latest Markit/CIPS UK Construction Purchasing Managers’ Index has revealed that the country’s construction sector enjoyed its 13th consecutive month of growth in May this year.

The index for the 31-day period stood at 60, and anything above 50 indicates growth. The research also revealed that house-building remained the strongest performing area of activity, while civil engineering output increased compared with April.

More jobs

Unsurprisingly, growth in the sector is leading to an increase in employment. May saw the 12th successive month of rising staff levels and the current period of job creation is the longest recorded since that seen between mid-2006 and early 2008.

Many firms are feeling confident about the future too. More than half of those polled for the index said they anticipated a rise in business activity over the year ahead. This compared with just four per cent who said they predict a reduction in activity.

Cost inflation of raw materials eased

In further good news for companies involved in the building industry, the Construction Purchasing Managers’ Index found that inflation in the cost of raw materials eased in May for the third month in a row. This meant it fell to its weakest since July 2013.

Strong expansion

Responding to the findings, Markit senior economist Tim Moore remarked: “The UK construction sector is enjoying its strongest overall phase of expansion since the summer of 2007. Residential building remains a key engine of growth, with survey respondents citing another surge in new house building starts during May.

“The latest survey highlights that the construction sector is now experiencing its longest period of job creation for six years. Strengthening demand for construction staff arrived amidst the fastest drop in sub-contractor availability since August 1997, which in turn contributed to a survey-record rise in sub-contractor charges in May.”

Upturn to continue

Also commenting on the index, CIPS chief executive David Noble suggested that strong expansion in new business and an improving economic picture in May reflected well on business optimism and on the outlook for the year ahead.

He added that this was supported by a steep rise in employment levels. This, Mr Noble claimed, indicates that the upturn will continue.

The expert went on to state: “Residential house building has been leading the way with activity in May, still buoyant on the back of stronger new work and investment spending.”

A note of caution

However, on a less positive note, the index revealed that supplier lead times rose considerably in May, with survey respondents identifying shortages of stock and bottlenecks in the supply chain.

Watching with interest

Policymakers will be watching developments in the construction sector with interest over coming weeks and months. The industry is widely considered to be an important barometer concerning the broader economic strength of the country.

If building work across the UK continues to pick up, this suggests that confidence among businesses and consumers is on the rise.

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