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House building helps UK construction output rise at fastest pace in five months

Demand for house building helped offset a drop in civil engineering and commercial construction activity.

The UK’s construction industry experienced a “moderate rebound” in November, as a pick-up in house building helped output grow at its fastest pace in five months.

The Markit/CIPS UK Construction purchasing managers’ index (PMI) showed a reading of 53.1 last month, up from 50.8 in October and easily beating economist forecasts for 51.0.

A reading above 50 indicates growth.

It was the highest reading in five months, with house building projects again emerging as the “primary growth engine” for industry activity.

The survey said participants chalked the growth up to “resilient demand” and a “supportive policy backdrop” for residential development.

It helped offset a drop in civil engineering activity and commercial construction, which was the weakest performing sub-sector in November as Brexit-related uncertainty and a subdued economic outlook weighed on client investment.

Duncan Brock, director of customer relationships at the Chartered Institute of Procurement & Supply (CIPS), said: “It appears that policy support and a small recovery in the UK economy has boosted sentiment and encouraged clients to come out of their shells and start building again.

“The housing sector was the primary driver of growth increasing at the fastest rate for almost half a year.

“However, it is private sector companies that need to commit to big-ticket spending, with commercial development still underperforming as persistent Brexit uncertainty continues to bite.”

He added that there was also concern that a drop in new contracts has dragged civil engineering works, with activity dropping for the third straight month and marking the longest period of decline for more than four years.

But some construction managers have expressed hopes that “forthcoming tender opportunities” linked to energy and transport infrastructure programmes will increase workloads.

Overall, companies pointed to a “moderate rebound in new orders” last month, thanks to a “general improvement” in client demand which had softened over the summer. In turn, it sparked a “moderate rise” in sector jobs growth.

Optimism among business picked up from October’s 58-month low, though the survey noted that confidence was still relatively subdued and was hovering near its lowest levels since mid-2013.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said relatively low mortgage rates, the Government’s Help to Buy Scheme and other policy initiatives are likely to keep home building activity bouyant.

“Meanwhile, signs that the Brexit divorce terms will be agreed imminently, enabling future relationship talks to begin, might help corporate confidence to recover.

“But with the UK Government insisting — for now — that Britain eventually will leave the EU’s single market and customs union, firms likely will remain reluctant to commit to construction projects with long-time horizons.

“We expect the construction sector to bump along the bottom as long as a hard Brexit still is one of the options on the table.”

Source: Express & Star