UK Construction Industry at three year high

PinBoard is delighted to learn the UK construction industry has reached its highest level of activity for over three years, which continues the positive signs of the last few weeks. There is rising expectation the industry is securing the foundations to build on this increase in activity, and the UK economy is finally improving.

Latest figures show a continued rise in housebuilding, with firms reporting increased work and rising profits, as buyers take advantage of increased confidence in the market.

The Markit/CIPS Construction Purchasing Managers' Index rose to 57.0 in July, representing an increase from 51.0 in June. Any figure above 50 indicates expansion in the sector, and much of this is down to the Government's Help to Buy scheme

The results reveal residential housebuilding leads the growth in new activity, though civil engineering returned to expansion in July and commercial construction output rose at its highest pace since May 2012.

Companies say growth has been helped by a third consecutive month of increased orders, that have raised confidence for the next 12 months.

Tim Moore, Markit senior economist, who wrote the report, said: "The survey for July highlights a new wave of optimism across the UK construction sector, with companies reporting a pace of expansion in excess of anything seen over the past three years.

“The swing back to output growth broadened to include commercial and civil engineering activity during July, although housing construction remains the one thing crucial to the sector’s strong upturn at present.

“Construction firms saw the fastest improvement in new orders for more than a year, which helped kick-start job creation and input buying growth during July."

David Noble, CIPS CEO said: "Homes are the beating heart of this rapid recovery in the construction sector, backed by a solid expansion in civil engineering and commercial activity. Better economic conditions, a jump in new business activity and the strongest rise in confidence since the era of austerity began in 2010, strongly suggest this growth can be sustained into Q3. 

"The rising confidence goes hand in hand with increasing output, underpinned by the expansion in new business orders, which was the steepest since April 2012. As a result, firms are starting to believe this is the real deal for the recovery, demonstrated by the strongest pace of job creation since December 2011.

"One constraint on the sector is the pressure on suppliers to meet the sharp rise in demand. Suppliers have been surprised by the speed and scale of the revival leading to lengthy delivery times due to a shortage of capacity based on hard learnt lessons over the past few years. This will be something to watch in the coming months."

PinBoard looked at this issue raised by David, last month, highlighting the shortage of building blocks and how some manufacturers and stockists have been caught short.

In addition to this encouraging news, the PMI survey for manufacturing indicated that the sector grew in July at its fastest pace for more than two years.

The reading of 54.6 for last month, from an upwardly revised June figure of 52.9, was the strongest since March 2011 and marked the fourth month in a row of expansion. PMI surveys are based on data from various private-sector firms, which supply information on factors such as output, new orders, stock levels, employment and prices.

All this is very encouraging news for the construction industry. Manufacturers, stockists, specifiers and contractors, should all take heart that after an unprecedented period of uncertainty about the long-term prospects of their jobs and companies, that confidence is again starting to grow.

Pinnacle Consulting is a leading construction sales and marketing recruitment agency.

Image courtesy of Artur 84 Residential building under construction / FreeDigitalPhotos.net