Sharpest rise in housebuilding since 2003

Published:  04 August, 2014

The UK has seen its steepest rise in residential building activity since November 2003, according to July data from the latest Markit/CIPS UK Construction Purchasing Managers’ Index (PMI).

Survey respondents attributed this to favourable funding conditions and strong demand for new housing starts. Civil engineering activity also expanded at a sharper pace in July, but commercial construction increased at a slower rate than one month previously.

Other findings included:

  • There was also a steep improvement in new business intakes during July. New orders have increased each month since May 2013
  • The rate of job creation across the construction sector was the fastest since the survey began in April 1997. Some respondents noted that staffing levels had been increased in response to concerns about sub-contractor availability
  • The survey’s findings seem to support these concerns, indicating a reduction in sub-contractor availability for the 13th month running, while rates charged by sub-contractors increased at a near-record pace
  • Construction companies indicated another steep increase in purchasing activity in July, extending the current period of expansion to 14 months. Strong demand for materials placed pressure on suppliers during the same month, resulting in a lengthening of vendors’ delivery times.

“July’s figures suggest the UK construction sector is enjoying its strongest cyclical upswing since the global financial crisis, while a new record rise in employment highlights that construction firms are increasingly confident about the sustainability of the upturn,” said Tim Moore, senior economist at Markit and author of the PMI.

“Looking ahead, a pressing concern for construction companies is the availability of materials and suitably skilled labour to support the recent growth streak. Cuts to supplier capacity have ushered in the worst period of input delivery delays since the survey began in 1997, while this summer has also been notable for construction firms reporting near-record increases in rates commanded for sub-contracted work.”

David Noble, group chief executive officer at the Chartered Institute of Purchasing & Supply (CIPS), also commended the data’s findings. “The housebuilding sector is racing ahead this quarter with the fastest growth in construction of homes for over a decade,” he said.

“One concern, however, is the strain on supply chains that could become a roadblock to sustained growth in the future. Construction firms reported the sharpest deterioration in the quality of sub-contracted work since 1999, which, combined with lengthening supplier delivery times, could conspire to put the brakes on the sector’s growth.”

That said, Mr Noble concluded on a positive note: “In the short-term at least, the outlook for the coming quarter is strong.”

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