UK Construction activity unexpectedly expands in July

Britain’s construction industry has gained momentum and grown at its fastest rate in over a year, boosted by the biggest increase in house-building since the end of 2015.

According to the Purchasing Managers’ Index (PMI), construction jumped to 55.8 from June’s reading of 53.1, and a reading above indicates growth. It was predicted to be a slowdown in growth to 52.8.

These figures are a huge contrast to the weak start to 2018 (which as a result of unusually icy weather, saw the first quarter output fall by 0.8%) and the overall tone from the construction industry was positive.

“While the recent rebound in construction work has been flattered by its recovery from a low base earlier in 2018, there are also signs that underlying demand conditions have picked up this summer,” HIS Markit economist Tim Moore said.

New orders flowed in at the fastest rate since May 2017 and both house-building and employment in the sector rose by the most since December 2015.

A general improvement in client demand has led to successful contract negotiations on large scale projects across the community. It has sparked a jobs boost, resulting in the largest rise in employment numbers in two and a half years.

However, rising demand has led to longer lead-times across the construction supply chain and construction companies are still cautious about the business outlook in the year ahead. The survey also showed that Brexit-related uncertainty continued to weigh on business sentiment.

Duncan Brock, group director at the Chartered Institute of Procurement & Supply (CIPS) said: “Rising demand meant that supply chains creaked under the strain and delivery times lengthened to the greatest extent seen in 12 months.”

“Material shortages, limited inventories and capacity pressures bore down as constructors caught up on previous weather delays and stocked up for new orders.

Though optimism remains at lower-than-average levels, with the biggest rise in job creation since December 2015, there’s some conviction that the future is brighter, at least in the short term,” Mr Brock concluded.

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