UK construction sector picks up slightly in August

MarkitUK construction firms continued to experience growth during August, led by fastest rise in commercial work for five months, according to new statistics.

Construction Purchasing Managers’ Index (PMI) figures from Markit and the Chartered Institute of Purchasing & Supply (CIPS) revealed that the UK construction’s PMI rose to 57.3, up from 57.1 in July, well above the neutral threshold figure of 50 indicating expansion.

Since May 2013, higher levels of business activity have been recorded each month, marking the longest period of sustained growth for over seven years.

The house-building sector showed the fastest rate of expansion, with growth also accelerating in the commercial sector, giving its strongest performance since March. Respondents to the survey felt the improving economic conditions could be attributed to the strong demand from private sector clients.

The report says that the construction industry is ‘upbeat’ with regards to underlying market conditions and the opportunities to tender for work, with some companies reporting they were unable to take on new work due to operational constraints and some could even be selective in the development opportunities taken on.

Over half of the respondents on the survey expected to see an increase in business activity over the next 12 months, with only five per cent expecting a downturn.

The rate of job creation in August continued to be extremely healthy, buoyed by increased workloads and imminent project commencements. The current period of employing staff now stretches to 27 successive months, which is the longest recorded by the survey for just over nine years.

The use of sub-contractors also saw an increase, experiencing its fastest rise since February.

Tim Moore, senior economist at Markit and author of the Markit/CIPS Construction PMI, said: “UK construction companies remained on a reasonably strong growth footing in August, helped by a sustained recovery in both residential and commercial building activity.

“The construction sector maintained its position as a strong engine of job creation in August, as permanent staff numbers and sub-contractor demand both picked up over the month. However, the surge in construction workloads over the past two-and-a-half years has created substantial skill shortages across the sector, with survey respondents reporting ongoing staff recruitment difficulties this summer.

“There was some encouraging news in terms of construction materials availability, as firms reported the lowest pressure on delivery times for over three years, helped by rising inventories and a rebound in supplier capacity.”

Vaughan Hart
Vaughan Hart

Scottish Building Federation managing director, Vaughan Hart, said that while the construction growth is positive, recovering the skills and jobs base is still “an overriding priority”.

He added: “These latest figures show positive signs of continuing growth in business activities and employment within the UK’s construction industry. Business sentiment seems also to be relatively positive about the industry’s future prospects although there continue to be some areas of concern, notably on margins.

“At the same time, the employment and skills base of the industry remains substantially lower than it was seven years ago. This will continue to constrain future industry growth until such times as significantly more people have been attracted back into the industry. In that context, finding ways to recover that jobs and skills base remains critical to the industry’s future success and must be an overriding priority.”

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