A pick-up in housebuilding helped the hard-pressed UK construction sector to bounce back last month from the harsh winter weather that led to a shutdown of building sites in March.
After dropping sharply as a result of the blizzards brought to Britain by the “beast from the east”, the latest health check showed construction – which accounts for 6% of the economy – returning to growth in April.
However, demand for new buildings remained subdued, according to the Markit/Cips UK construction purchasing managers’ index, with total new work rising only modestly on the month. The PMI rose to 52.5 last month, up from 47 in March. Economists were expecting a figure of 50.5. A reading above 50 represents growth.
Tim Moore, the associate director at IHS Markit, which compiled the report, said: “A rebound in construction activity was pretty well inevitable after snowfall resulted in severe disruptions on-site during March.
“Housebuilding led the way, with growth in April among the strongest seen over the past two and a half years. However, the picture was less positive in other areas of construction, with commercial building and civil engineering work rising only marginally.”
Moore added that heightened economic uncertainty was creating a risk-averse mood among clients, leading to spending plans being delayed.
The barometer of construction activity slumped to 47 last month from 51.4 in February. Bad weather had a particularly heavy impact on civil engineering projects, according to the survey of more than 170 construction firms. The survey is watched by the Bank of England to gauge what is happening at grassroots level in the economy.
The better-than-expected performance by construction helped lift the pound from a four-month low against the dollar, but was seen as having no impact on the Bank’s interest-rate decision next week. After weak recent data, borrowing costs are predicted to remain on hold.
Samuel Tombs, the chief economist at Pantheon Macroeconomics, said: “Housebuilding remains the standout subsector; the housing PMI jumped to 57.4 in April – its highest level since May 2017 – from 51.1 in March.
“But the PMIs for the commercial and civil engineering sectors rose only to 51.2 and 51.5 respectively, from 46.4 and 43.6 in March. The long investment time horizons for commercial and civil engineering projects mean that both sectors likely will remain depressed until some clarity emerges over the UK’s long-term relationship with the EU.
“In addition, the construction sector will be hurt by a planned 5.4% year-over-year reduction in public sector gross investment in this fiscal year. As a result, the odds of the construction sector enjoying a sustained recovery this year still look remote.”
Source: The Guardian