Construction industry in “rude health” despite official figures

Source: Market/CIPS
Source: Market/CIPS
Source: Market/CIPS
Source: Market/CIPS

Rising construction industry output, increasing levels of new orders and the fastest pace of job creation for almost a year have been reported by a widely reported industry survey, contradicting recent official reports of a reduction in construction activity.

The Markit / CIPS UK Construction Purchasing Managers’ Index (PMI) has reported higher levels of activity across all three broad sections of the industry in October. Commercial building work was a key growth driver, increasing at the sharpest rate of expansion for eight months. This has offset the slowing housing and civil engineering sectors, with both expanding at slower rates than in September.

The latest survey marked two and a half years of sustained output growth across the UK construction sector. While the pace of expansion remained weaker than seen on average in 2014, the latest reading of 58.8 was comfortably above the pre-election low recorded in April (54.2).

The latest data from Market and CIPS is at odds with the Office of National Statistics, which last week reported a 2.2% drop in construction output in Q3 2015.

Tim Moore, senior economist at Markit and author of the Markit / CIPS Construction PMI, said: “Another relatively buoyant construction PMI reading indicates that the sector remains in rude health. Rather than acting as a drag on the economy, as suggested by recent GDP estimates, the sector is continuing to act as an important driving force behind the ongoing UK economic upturn.”

He added that the latest reading shows the construction sector remains “firmly in expansion mode.” This claim has been supported by the high levels of confidence among construction firms, 59% of which forecast a rise in business activity over the next 12 months. According to anecdotal evidence taken as part of the PMI, this optimism was due to an encouraging number of new invitations to tender and expectations of solid spending levels among key clients.

The latest growth in new business also caused construction companies to take on staff at a faster pace. Some firms commented on efforts to reduce their reliance on sub-contractors, with the latest data pointing to a fall in sub-contractor availability for the twenty-eighth month running, which is the longest continuous period since 2003.