UK construction returning to growth

Britain’s construction industry showed signs of recovery last month, as output beat expectations and picked up from July’s seven-year low.

The Markit/CIPS construction purchasing managers’ index (PMI) hit 49.2 in August, up from 45.9 in July and above economists’ expectations of 46.5. A reading above 50 indicated growth. The pound rose 0.8% against the dollar following the update to 1.328 US dollars. Sterling was also 0.1% ahead against the euro at 1.187 euros.

The update follows a surprise swing in manufacturing output in August, notching up its highest monthly rise in a quarter of a century.

Construction activity recorded its fastest fall since June 2009 in July as uncertainty over Britain’s decision to ditch the EU triggered a steep fall in commercial building activity.

Business activity recorded only a marginal fall in August, as new order volumes “moved closer to stabilisation”.

The report said the rate of contraction in housing activity and commercial building was the slowest for three months, while civil engineering was stable after falling in July.

Employment in construction also benefited, with staffing levels recording a small expansion in August.

The use of sub-contractors continued to decline.

Sterling’s plunge to 31-year lows since the Brexit vote has ramped up costs for construction firms, however, as input cost inflation grew for the third month in a row and hit its highest level for five years.

Business confidence also rebounded from a 39-month low in July, but was still close to the lowest level on record for the past three years.

Tim Moore, senior economist at Markit, said the survey only highlights “a partial move towards stabilisation” and not a return to “business as usual” for the construction sector.

“The downturn in UK construction activity has eased considerably since July, primarily helped by a much slower decline in commercial building,” he said.

“The latest figures can be viewed as welcome news overall after a challenging summer for construction.”

Picture: PA. UK post-Brexit construction activity was better than expected.