Housing recovery puts UK construction firms ‘back in expansion mode’

CIPS Sept 16UK construction firms have moved back into “expansion mode” after the industry reported a rise in work levels across the sector for the first time since the EU referendum.

The Markit/CIPS UK Construction Purchasing Managers’ Index registered 53.2 in September, up from 49.2 in August and above the 50.0 mark which represents growth in the industry for the first time in four months.

Buyers also reported the fastest rise in new orders for six months as residential work led the recovery.

Tim Moore, senior economist at IHS Markit and author of the Markit/CIPS Construction PMI, said: “UK construction companies moved back into expansion mode during September, led by a swift recovery in residential building from the three-and-a-half year low recorded in June.

“Resilient housing market conditions and a renewed upturn in civil engineering activity helped to drive an overall improvement in construction output volumes for the first time since the EU referendum.

“A number of survey respondents noted that Brexit-related anxiety has receded among clients, although it remained a factor behind the ongoing decline in commercial building work.

“Construction firms appear reasonably optimistic about the near-term outlook, with confidence linked to the fastest rise in new orders since March and a more upbeat economic news flow in general.”

A solid rebound in residential activity, the strongest recorded since January, was the key factor boosting overall construction output. A number of firms cited resilient demand for residential building work and generally improving market conditions.

Construction companies also pointed to a renewed rise in civil engineering activity, with the pace of expansion the fastest since March, though commercial activity decreased for the fourth month running, which is the longest period of sustained decline since early-2013.

The September figures also marked greater contractor confidence, with 45 per cent of those surveyed forecasting a rise in output before the year end, with only 9 per cent anticipating a reduction.

Kelly Boorman, head of construction at RSM, said: “It will be a great relief to many in the construction sector that September saw a return to growth. Indeed, the Construction PMI is now well above the seven year low recorded in the immediate aftermath of the referendum, helping to ease fears that the post-referendum shock would be long-lasting.

“The rebound was particularly marked in the residential sector. No doubt the Government’s announcement yesterday that it is opening a £3bn Home Builders Fund to help build more than 225,000 new homes will help continue this momentum going forward.

“It is also encouraging to see that new order books are increasing for the first time since April, once again underlining that confidence is returning in the sector despite the downturn in commercial construction activity.

“There are, however, some clouds on the horizon. The news today that the pound has hit a 31 year low against the US dollar will heighten concerns that the price of imported construction materials will rise even further.”

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