Construction industry sees sharpest growth since before the recession

Out-Law News | 06 Feb 2014 | 10:25 am | 1 min. read

Output in the UK construction industry has grown at its fastest rate since 2007, according to a new survey.

The Markit and Chartered Institute of Purchasing and Supply's Construction Purchasing Managers' Index (PMI) showed output across the UK's construction industry reach a figure of 64.6 in January, up from a PMI figure of 62.1 in December. A value of over 50.0 on the PMI scale signifies growth.

PMI data is collected via a monthly survey of more than 170 purchasing executives working within the construction sector, based in businesses of all sizes.

Markit said that the January PMI of 64.6 is the highest recorded growth in the industry since August 2007 and that its survey showed "near-record growth rates" across house building, commercial and civil engineering activity.

"The upturn was again led by house building, which increased for the twelfth successive month, but surging growth was also recorded for commercial construction and civil engineering," Markit said in a statement. "The rise of the latter two activities points to increased spending by business on infrastructure, office space, industrial units and retail outlets."

Markit said that construction industry businesses it surveyed expressed the highest levels of confidence about the forthcoming year's activity since September 2009. Jobs have also been created in the industry for eight months in a row now, it confirmed.

Construction industry expert Graham Robinson of Pinsent Masons said that the "strong rebound" the construction industry is enjoying was welcome, but identified some challenges associated with the rate of growth in some areas and predicted that that rate would "moderate" in the longer term.

"The success of the house building and commercial markets in particular are acting as the main drivers for this strong rebound from the major troughs the construction industry experienced in the depths of the recession," Robinson said.

"However, much of the growth in house building can be attributed to the Government's continued backing for its 'Help To Buy' scheme, whilst the boom in the London property market may be masking the fact that in many parts of the country the commercial property market is still struggling," he said.

"There is some way to go in terms of taking up existing capacity in some areas, but where there are hot spots of activity there may be resourcing problems for contractors, in terms of both labour and materials. Although jobs have been created for a steady eight months in a row now, the construction jobs market has been rising from a very low base. Many of the workers who found themselves out of work in the recession have found jobs in other industries," he said.

Robinson said that "headwinds" in the European economy will continue to affect the UK export market and that this would eventually cause current growth levels in the UK construction industry to slow.