Home News Housing leads construction output recovery in November

November data from IHS Markit/CIPS has shown a moderate rebound in UK construction output, with business activity rising at the strongest rate since June. New orders and employment numbers also increased to the greatest extent in five months.

However, the improvement in construction growth was largely confined to residential work. The latest survey revealed sustained reductions in commercial building and civil engineering, with the latter now experiencing its longest period of decline since the first half of 2013.

Adjusted for seasonal influences, the IHS Markit/CIPS UK Construction Purchasing Managers’ Index® (PMI®) picked up from 50.8 in October to 53.1 in November, to remain above the 50.0 no-change value for the second month running.

Tim Moore, Associate Director at IHS Markit and author of the IHS Markit/CIPS Construction PMI, said: “UK construction companies experienced a solid yet uneven improvement in business conditions during November. Once again, resilient house building growth helped to offset lower volumes of commercial work and civil engineering activity.

“Survey respondents noted that residential projects underpinned the rebound in total new order growth to its strongest since June, helped by strong demand fundamentals and a supportive policy backdrop.

“Construction firms reported that heightened economic and political uncertainty continued to hold back commercial development activity. The latest drop in civil engineering was linked to a recent lack of tender opportunities for infrastructure-related projects.

“Business optimism across the construction sector remained relatively subdued, but picked up from the near five-year low seen in October. This represented the first improvement in confidence for three months, which construction firms attributed to increased sales enquiries and hopes that risk aversion among clients will recede over the course of next year.”

Lead-times for construction products and materials lengthened sharply, linked to pressure on supplier capacity. However, cost inflation eased to its least marked for 14 months, with some firms reporting signs that exchange-rate driven price rises had started to lose intensity.
Comments

Business confidence regarding the year-ahead outlook for construction activity remained among the most subdued since mid-2013, which panel members mainly linked to heightened political and economic uncertainty. However, the degree of optimism picked up from October’s 58-month low, helped by a modest recovery in new invitations to tender during the latest survey period.

Duncan Brock, Director of Customer Relationships at the Chartered Institute of Procurement & Supply, said: “At last the construction sector, has picked its feet up with the biggest overall improvement in five months, underpinned by a moderate rise in new orders, but the strongest since June.

“It appears that policy support and a small recovery in the UK economy has boosted sentiment and encouraged clients to come out of their shells and start building again. The housing sector was the primary driver of growth increasing at the fastest rate for almost half a year.

“However it is private sector companies that need to commit to big ticket spending, with commercial development still underperforming as persistent Brexit uncertainty continues to bite. Concerns over civil engineering in particular are also prevalent with its downward course the longest since 2013 and linked to a shortfall of new tender opportunities.

“Across construction supply chains, delivery times have been under pressure, as materials were in higher demand, while stocks remained in short supply. Lead-times from vendors have now deteriorated in every month for over seven years.”

Leave a Reply