Construction output rises at fastest pace for five months

November saw a modest rebound in UK construction output, with business activity rising at the strongest rate since June, according to the seasonally-adjusted IHS Markit/CIPS UK Construction Purchasing Managers’ Index® (PMI® ).

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 as 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.

The latest reading 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 and was the highest for five months and signalled a solid rate of business activity growth across the construction sector. House building projects were again the primary growth engine for construction activity.

Commercial construction was the weakest performing area of activity in November, which continued the trend seen for much of 2017 so far.

Meanwhile, civil engineering activity fell for the third successive month, which represents the longest phase of decline seen for over four years.

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.

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.”

 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.

 “Overall, the sector showed an incremental improvement, but business optimism was on the rise and up from last month’s five-year low. Perhaps the darkest days are behind the sector with fresh impetus on the horizon for the New Year.”