Construction Growth Reaches Four-Month High in November

November data pointed to an expansion of UK construction output, which was supported by an upturn in the three sub-categories of activity monitored by the survey.

Gas growth of new work picked up since October and rising client demand accelerated employment rates. The rate of job creation was the fastest since December 2015. However, business confidence remained relatively subdued, with survey respondents noting that Brexit-related concerns had weighed on their growth projections for the next 12 months.

The IHS Markit/CIPS UK Construction Index registered 53.4 in November, up from 53.2 in October, to remain above the crucial 50.0 no-change mark for the eighth successive month.

Residential building reclaimed its position as the fastest growing area of construction work in November. The latest rise in house building activity was the strongest for three months.

Survey respondents said rising client demand continued to boost construction output during November. The rate of new business growth picked up since October, but some firms noted that Brexit uncertainty had held back new order growth and caused delays to public sector spending decisions.

Higher levels of new business contributed to an expansion of input buying and rising employment numbers with the latest increase in staffing levels being the fastest since December 2015. Meanwhile, greater demand for construction products and materials contributed to worsening vendor performance. Longer delivery times from suppliers have been reported in each month since September 2010.

Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply said, “Levels of new work improved, and employment numbers increased at their fastest rate since December 2015, as projects finally started after sustained periods of delay. But before the champagne corks start popping, this rise in the overall index was small. Even with optimism at a three-month high, there is currently no indication that this will become a sustained rise as we approach the end of the year.”

Growing demand for construction inputs led to another rise in input prices during November. Respondents also commented on higher transportation costs and rising staff salaries. The overall rate of input price inflation was the fastest since June.

Meanwhile, latest data indicated that business optimism across the construction sector rebounded from the near six-year low seen in October. The latest reading signalled the strongest degree of confidence for three months. Evidence suggested that Brexit-related concerns remain the main factor weighing on business optimism.

Following the release of the PMI figures, Phil Harris, Director at BLP Insurance, commented on the sector: “The continued positive trend revealed today seems somewhat irrelevant for the construction sector against the backdrop of the upcoming parliamentary vote on Brexit on 11 December. However, with the sector stuck in a state of perpetual paralysis for the last year, and with 2019 fast approaching, it is time for construction to look beyond Brexit.

“With the festive period looming, the sector’s seasonal lag will soon kick-in. The focus for many will turn to getting projects over the line rather than landing new contracts. This is only natural but regardless of a definitive Brexit outcome, or lack thereof, the industry must persevere with its long-term aspirations in 2019.”

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