The UK’s construction sector experienced stronger than expected recovery in June after struggling for the past year, with activity increasing at its fastest level in seven months. New orders at the fastest rate since May 2017 and the pace of job creation accelerated to its strongest for a year. The IHS Markit/CIPS UK Construction PMI rose to 53.1 in June, up from 52.5 in May and above market expectations of 52.4. This is the highest since November 2017 and shows a change of pace for the sector and reflects a rise in business optimism.
“It appears the brakes are off for the construction sector,” said Duncan Brock, group director at the Chartered Institute of Procurement & Supply, who produce the PMI survey alongside IHS Markit.
“Despite being hampered by economic uncertainty, firms reported an improved pipeline of work as clients committed to new commercial projects and hesitancy was swept away,” he said.
However, Noble Francis, economics director at the Construction Products Association, said that he would want to “see a few months of rising new orders given that new orders are quite volatile” before he would consider that growth in the sector was sustainable.
There are several views as to why the construction industry experienced a downturn. One is that a number of big infrastructure projects had come to an end, but this would only be a problem if the pipeline for future projects wasn’t there. And if this is the case, what has caused the hesitancy in the pipeline? This could easily be attributed to companies delaying investment or even cancelling projects due to the uncertainty over the outcome of the Brexit negotiations.
However Max Jones, a relationship director for construction at Lloyds Bank, has another view, saying that the bounce back confirms that the slowdown in the first quarter was due to the disruption caused by snowstorms which shut down activity on building sites.
A point of interest is that optimism for the construction sector was strongest outside London in the IHS Markit/CIPS survey, with particular strength seen in the north-west, West Midlands and Bristol, driven by housebuilding.