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New construction work rises at fastest rate for a year

There was strong construction output growth in October, according to the latest Markit/CIPS UK Construction PMI® survey.

New construction work rises at fastest rate for a year

Commercial building work was a key growth driver in October, as housing and civil engineering activity both expanded at slower rates than in September, the report found.

The headline seasonally adjusted Markit/CIPS UK Construction Purchasing Managers’ Index® (PMI® ) registered 58.8 in October, which was down from 59.9 in September but still well above the 50.0 no-change threshold.

As a result, the latest survey marked two-and-a-half years of sustained output growth across the UK construction sector. While the pace of expansion remained weaker than seen on average in 2014, the latest reading was comfortably above the pre-election low recorded in April (54.2).

Higher levels of activity were recorded across all three broad categories of construction monitored by the survey. However, housing activity growth eased from September’s 12-month high, and the latest rise in civil engineering was the slowest since May. Commercial building work, on the other hand, increased at the sharpest pace for eight months.

Reports from survey respondents suggested that greater output volumes reflected a strong pipeline of work-in-hand, alongside faster new order growth over the month. The latest rise in incoming new work was the steepest since October 2014, with construction companies highlighting new project wins from both public and private sector clients. Looking ahead, construction companies remain highly upbeat about their prospects for growth over the next 12 months, with more than half (59%) forecasting a rise in business activity and only 7% expecting a decline.

A number of construction firms noted that greater capacity among suppliers had helped to alleviate the pressure on average lead times for raw materials.

Tim Moore, Senior Economist at Markit and author of the Markit/CIPS Construction PMI® , said: “October’s survey indicates that the UK construction sector remains firmly in expansion mode, although commercial building work was the only category to experience faster growth than in September. “Another relatively buoyant construction PMI reading indicates that the sector remains in rude health. Rather than acting as a drag on the economy, as suggested by recent GDP estimates, the sector is continuing to act as an important driving force behind the ongoing UK economic upturn.

“Construction companies also noted a rebound in new business flows during October and responded to rising workloads by taking on extra staff at the fastest rate for almost a year. Shortages of skilled staff persisted as a result, with the current period of falling sub-contractor availability the longest seen in over a decade.”

David Noble, Group Chief Executive Officer at the Chartered Institute of Procurement & Supply, said: “Supplier performance deteriorated to the least marked extent for almost five years in October, as capacity was increased to meet an upsurge in purchasing activity – the strongest for nine months.

“Prompted by a rise in new orders, pipeline work, low raw material costs and more marketing activity, the sector also experienced the speediest expansion in staffing levels since November 2014 to meet this increased volume of contract demands.

“With sustained growth now for two-and-a-half years, respondents also reported more confidence in the sector and from clients, and an expectation of an even stronger performance next year.”

About Fiona Russell-Horne

Fiona Russell-Horne
Group Managing Editor across the BMJ portfolio.

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