Builders rebound but confidence stays hammered
● Industry snapshot suggests activity being propped up by housebuilding
Britain’s construction sector has notched up its strongest performance in five months as housebuilding activity gathered pace, a key report yesterday revealed.
Industry observers said government policy support and a steady UK economy, which remains in modest growth territory, had boosted sentiment.
However, concern was expressed over a lack of new contracts hitting civil engineering works, with activity in that sub-sector dropping for the third straight month and marking the longest period of decline for more than four years.
The latest Markit/cips construction purchasing managers’ index (PMI) showed a reading of 53.1 last month, up from 50.8 in October and easily beating economists’ forecasts for 51. Any reading above 50 denotes growth.
It was the strongest outcome in five months, with housearound building projects again emerging as the “primary growth engine” for industry activity.
The survey said participants chalked the growth up to “resilient demand” and a “supportive policy backdrop” for residential development.
It helped offset a drop in civil engineering activity and commercial construction, which was the weakest performing sub-sector in November as Brexit-related uncertainty and a subdued economic outlook weighed on client investment.
The headline PMI result was welcomed by Lovell Scotland, the specialist home-building arm of construction giant Morgan Sindall Group, as it hailed “good progress” in 2017.
Regional managing director for Scotland, Stephen Profili, said: “Planning policy does continue to present obstacles to housing delivery and the industry will be looking forward to seeing a positive impact from the Scottish Government’s ongoing plans for planning reform.
“However, government and industry also need to work together to tackle issues skills, capacity and innovation. In particular, to have a real chance of delivering new homes on the scale needed to meet demand here in Scotland, we will need to see real innovation in the processes and techniques we use to build houses in the future.”
Howard Archer, chief economic advisor to the EY Item Club think-tank, said: “While the PMI points to the construction sector growing at the best rate for five months in November, it is still clearly finding life challenging.
“Construction activity was lop-sided in November with growth entirely dependent on house building. Both commercial activity and civil engineering activity continued to contract.
“Overall, the survey does little to inspire confidence that the sector is headed for markedly better fortunes in 2018.”
Optimism among business picked up from October’s 58-monthlow,thoughthesurvey noted that confidence was still relatively subdued and was hovering near its lowest levels since mid-2013. Meanwhile, cost inflation hit its lowest level in 14 months.