UK construction activity reaches eight-month high

Construction firms in the UK have continued to rebound from a post-referendum weak patch, according to industry figures released on Friday.

The Markit/CIPS UK Construction Purchasing Managers’ Index (PMI) showed that business activity and incoming new work increased at the strongest pace since March. At the same time, however, costs rose at the fastest pace since April 2011, fuelled by the decline in sterling after UK voters chose to leave the European Union.

“Higher prices were reported for a number of materials including bricks, blocks and slate, as businesses struggled with managing costs,” explained David Noble, group chief executive at the Chartered Institute of Procurement & Supply (CIPS). “Yet, in spite of this grip on precious margins, headcounts were increased and demand for sub-contractors was also sustained.”

The PMI edged up to 52.8 in November, from 52.6 in October, signalling an expansion of total business activity for the third month in a row.

A poll of economists by news agency Reuters had forecast a reading of 52.2.

Housebuilding activity remained the best performing category of construction output last month, although the pace of expansion slipped to a three-month low. Construction firms also reported a marginal rebound in commercial activity, ending a five-month period of decline. Civil engineering work remained the weakest area of activity, IHS Markit said.

Tim Moore, senior economist at IHS Markit and author of the report, commented:

“November’s survey data revealed the strongest rise in overall new business volumes since March. However, lingering economic uncertainty and subdued investor sentiment meant that optimism towards the year-ahead outlook remained close to its lowest since early-2013.

David Noble from the CIPS added:

“Reports of lingering uncertainty around the progress of Brexit negotiations had business optimism divided, where only 45% of respondents expected a rise in activity next year — one of the lowest since the middle of 2013. And, as commentators warn about more inflationary impacts next year, the sector will be concerned that decisions from policymakers must ensure these effects are minimalised so that growth is maintained.”