Markit/CIPS UK Construction PMI indicates positive outlook for UK construction in 2016

Commercial building activity increased in the UK towards the end of 2015, which had led to a rebound in construction sector performance, according to the latest Markit/CIPS UK Construction PMI published on Tuesday.

Data collected between 4 and 22 December 2015 for the seasonally adjusted construction sector Purchasing Managers’ Index PMI shows that UK construction companies have rebounded from the slowdown recorded in November 2015 with the expansion of overall business activity.

The PMI registered 57.8 in December, an increase from a seven-month low of 55.3 recorded in November.

Commercial construction has grown the fastest since December 2014 and continued to be the best performing sub-category of activity in December this year.

Housing activity was much stronger compared to the 29-month low seen in November and anecdotal evidence has revealed an increased in development opportunities and new invitations to tender. However, civil engineering activity declined, ending a seven-month period of sustained growth, in contrast with the overall upward trend seen across the UK construction sector in December.

Construction companies also reported a growth in employment and sub-contractor usage also increased at the fastest rate since August 2014.

Respondents to the survey said that greater client budgets, improving economic conditions and a strong pipeline of new projects had underpinned business confidence in December.

Tim Moore, Senior Economist at Markit and author of the Markit/CIPS Construction PMI, commented: “UK construction companies finished 2015 in a positive fashion, as overall output growth recovered from November’s seven-month low. Commercial building was the main engine of growth, with this area of activity expanding at the strongest pace since autumn 2014. There was also a rebound in house building activity in December, but momentum was still much softer than the post-crisis highs achieved during 2014.

“Civil engineering remained the weakest performing area of construction in December. Nonetheless, civil engineering activity looks set to experience a near – term spike at the turn of 2016 from spending related to flood relief and additional capital budgets. In the immediate aftermath of the winter 2013/14 floods, UK civil engineering activity picked up at a survey-record pace.

“Across the UK construction sector as a whole, the latest survey indicated a strong degree of optimism about the outlook for 2016, with firms mainly citing a strong pipeline of commercial development projects and new housing starts. There were also reports that sustained improvements in UK economic conditions had led to upbeat expectations for clients’ budget setting for the year ahead.”