Activity in Britain’s construction industry rose much faster than expected in November due to an increase in housebuilding, according to a closely watched survey. The IHS Markit construction purchasing managers’ index rose from 50.8 in October to to 53.1 in November. Economists had forecast a reading of 51. Anything above 50 indicates expansion.
The sector has been more sensitive to Brexit-related uncertainty than other industries, because construction projects take years to complete. Businesses must anticipate what demand for offices and houses will be when a building is finished, rather than when construction begins.
Official UK growth figures for the third quarter of this year showed that the construction sector contracted for two consecutive quarters, as a number of large commercial and infrastructure projects came to an end without new work to replace them. Technically, this means that industry has fallen into a recession. However, the latest PMI surveys suggest that the sector has regained some momentum and returned to growth during the final three months of the year.
The UK government’s Help to Buy equity loan scheme has made residential property a rare bright spot for the construction industry in recent months, with the policy supporting demand for new houses. This trend continued in November, according to the PMI survey.
However, the survey also found that commercial building and civil engineering work continued to decline during the month.
Civil engineering activity has now declined for the longest period since the first half of 2013, Markit said. “UK construction companies experienced a solid yet uneven improvement in business conditions during November,” said Tim Moore, an associate director at IHS Markit.
“Once again, resilient house building growth helped to offset lower volumes of commercial work and civil engineering activity.”
The fall in commercial construction work can be explained in part by businesses’ concerns that Britain’s financial and professional services sectors will grow more slowly after Brexit. Projects that started before last year’s EU referendum are being completed but are not being replaced, said Noble Francis, economics director at the Construction Products Association.
“The fall in commercial offices new orders suggests that these falls in commercial activity will continue in December and in 2018,” he added. Recommended UK seeks a step change in productivity growth via £31bn fund UK Budget watchdog denies claims it is anti-Brexit Stakes high for leaders as first phase of Brexit talks concludes Large civil engineering projects, such as the Crossrail development in London, have also come to an end and have not been replaced by new activity.
Respondents to the PMI survey said they hoped new tenders on energy and transport projects would support activity in the future. Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said that “signs that the Brexit divorce terms will be agreed imminently, enabling future relationship talks to begin, might help corporate confidence to recover”.
However, he added that some companies would probably remain reluctant to commit to construction projects so long as the UK government plans to leave the EU’s single market and customs union. The upbeat construction figures published on Monday follow a survey of manufacturers, published on Friday, that found Britain’s manufacturing sector expanded at the fastest rate for four years. Together, the surveys suggest the UK economy may have accelerated in the final quarter of 2017.
Source: Financial Times
“Thank you very much BCC for the very impressive office refurbishment you have done for us. With experience in suspended ceilings and partitions your advice helped us to make the right choices for what we needed. The whole project was made very easy for myself.”
“We have used BCC a number of times and they deliver a very quick turn around but not sacrificing a very high standard of work. We will definitely continue to use BCC."