Britain’s struggling construction sector appears to have climbed out of recession in November as a surge in housebuilding came to the ailing industry’s rescue.
Commercial and civil engineering work is still contracting, but the rise in residential construction has dragged optimism in the industry up from its recent five-year lows.
The purchasing managers’ index, an influential private sector survey compiled by IHS Markit, rose to 53.1 in November, up from 50.3 in October.
Any score of above 50 indicates growth, so the sector appears to have moved from stagnation to modest growth.
That is a substantial improvement from the nadir of 48.1 in September.
Official data showed the industry shrank by 0.5pc in the second quarter of 2017 and 0.9pc in the third quarter - a pair of negative results which put the construction sector into recession.
But the recovery in survey data could indicate that recession is now over.
“The survey suggests that the construction activity could eke out modest growth in the fourth quarter,” said Howard Archer, chief economic advisor to the EY Item Club.
He does not expect any rapid recovery as companies hold off making big investments.
“Extended tepid economic activity and heightened economic, political and Brexit uncertainties are clearly hampering the construction sector. Clients are particularly cautious over committing to major construction projects,” he said.
But if this uncertainty is cleared up, other analysts think growth could pick up.
“Looking ahead, continued support from relatively low mortgage rates, the Help to Buy Scheme and other housing policy initiatives should ensure that housing maintains momentum,” said Samuel Tombs at Pantheon Macroeconomics.
“Meanwhile, signs that the Brexit divorce terms will be agreed imminently, enabling future relationship talks to begin, might help corporate confidence to recover.”
More government activity could also bolster infrastructure construction.
“The latest drop in work on civil engineering projects was only marginal,” said IHS Markit.
“Some survey respondents commented on hopes that forthcoming tender opportunities on infrastructure programmes (particularly energy and transport) would help to support workloads.”
In the financial year 2016-17 a total of 217,000 homes were built in England, the highest number since the financial crisis.
This component of the PMI rose to 56.6 in November, its highest level since June.
Builders took on more workers to handle the extra construction, with the employment index rising to 52.8.
The commercial construction index remained in negative territory at 48.4 while the civil engineering component edged up to 49.4.
Source: The Telegraph
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