Expert warns "no room for complacency" as survey shows sharpest rise in construction output in six years

Chris Hallam of Pinsent Masons, the law firm behind Out-Law.com, welcomed the "positive news" from economists Markit and the Chartered Institute of Purchasing and Supply (CIPS) following the publication of their October 2013 survey of construction purchasing managers (3-page / 375KB PDF). However, he said that the Government must "continue to deliver on its infrastructure commitments so that the industry can continue to recover and generate growth in the wider economy".

"The latest figures are very encouraging," he said. "Growth is continuing in all main sectors, again led by housing. Confidence is at its highest level for over three years and the rate of job creation is at its fastest for six years. So, all is well in the construction industry? Well, not quite. Today's figures need to be read in context – construction output remains over 10% down on the pre-recession peak and there is a long way to go to get the industry back to where it needs to be."

The Construction Purchasing Managers' Index (PMI) figure for October was 59.4, up from 58.9 in September and above the score of 50 that indicates growth for the sixth consecutive month, according to Markit and CIPS. Output growth was higher than the recent peak recorded in August and was the steepest since September 2007, according to the report. PMI data is collected via a monthly survey of more than 170 purchasing executives working within the construction sector.

Although housing activity remained the strongest performing area recorded by the survey, the analysts also reported "robust and accelerated" rises in both civil engineering and commercial activity. The report particularly noted the rate of growth in commercial activity, which was the most marked since April 2012, it said.

Companies surveyed reported that improvements in the UK's economic outlook, leading to a corresponding rise in client spending, and better housing market conditions contributed to the positive figures. In particular, new business rose for the sixth consecutive month, although the rise was not as pronounced as in August. High levels of new work also led to a further increase in staffing levels, with the steepest increase in employment for six years, according to the survey. In addition, 52% of survey respondents predicted that their output would rise over the year ahead.

"UK construction output continues to rise like a phoenix from the ashes, with housing, commercial and civil engineering activity all seeing strong rates of expansion at the start of the fourth quarter," said Tim Moore, a senior economist at Markit and co-author of the report.

"Importantly, the latest Construction PMI survey signals that job hiring and input buying are now rising in tandem with greater new business inflows. Improved opportunities to tender and a broadening of the recovery beyond housing activity have helped foster confidence in the longer-term outlook for business conditions. Highlighting this, the latest survey indicated that more than four times as many construction firms expect a rise in output over the years ahead as those that anticipate a fall," he said.