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Construction industry buoyant in June Construction industry buoyant in June amid post-election bounce
(about 2 hours later)
UK building firms reported bulging order books in June to defy previous forecasts of a slow and steady recovery after the general election.UK building firms reported bulging order books in June to defy previous forecasts of a slow and steady recovery after the general election.
Construction data signalled a further rebound in the sector’s output growth from the 22-month low recorded in April that many economists took to be a signal of nervousness ahead of an election that could have brought higher property taxes under a Labour-led coalition.Construction data signalled a further rebound in the sector’s output growth from the 22-month low recorded in April that many economists took to be a signal of nervousness ahead of an election that could have brought higher property taxes under a Labour-led coalition.
The headline seasonally adjusted Markit/Cips UK construction purchasing managers’ index (PMI) jumped from 55.9 in May to 58.1 in June. The index compiler, Markit, said the latest reading was well above the long-run survey average (54.6) and pointed to the fastest increase in overall construction activity since February. The headline seasonally adjusted Markit/Cips UK construction purchasing managers’ index (PMI) jumped from 55.9 in May to 58.1 in June. The index compiler, Markit, said the latest reading was well above the long-run survey average (54.6) and pointed to the fastest rise in overall construction activity since February.
Alan Clarke, UK economist at Scotia Bank, said: “Having spoken to people at the coalface, I gather that there is a bit of an election effect going on here. Various projects were likely to have been held back. So what we may be seeing here is a post-election catch-up.”Alan Clarke, UK economist at Scotia Bank, said: “Having spoken to people at the coalface, I gather that there is a bit of an election effect going on here. Various projects were likely to have been held back. So what we may be seeing here is a post-election catch-up.”
Last month the Office for National Statistics said construction was not such a big drag on the wider economy in the first quarter of 2015. The upward revision to previously lacklustre figures resulted in economic growth rising to 0.4% in the first quarter of the year rather than the 0.3% previously estimated. Last month, the Office for National Statistics said construction was not such a big drag on the wider economy in the first quarter of 2015. The upward revision to previously lacklustre figures resulted in economic growth rising to 0.4% in the first quarter of the year rather than the 0.3% previously estimated.
Markit said respondents to the survey said their clients were feeling bouyant about the outlook for the UK economy, pushing overall growth of new work to its second successive month of expansion and its steepest rise since October 2014. Markit said respondents to the survey said their clients were feeling buoyant about the outlook for the UK economy, pushing overall growth of new work to its second successive month of expansion and its steepest rise since October 2014.
“Anecdotal evidence linked greater new business volumes to rising client confidence and improving business conditions across the UK economy as a whole,” it said.“Anecdotal evidence linked greater new business volumes to rising client confidence and improving business conditions across the UK economy as a whole,” it said.
An upturn in job creation across the construction sector was also a prominent factor in June. Markit said the latest increase in employment numbers was the fastest since December 2014.An upturn in job creation across the construction sector was also a prominent factor in June. Markit said the latest increase in employment numbers was the fastest since December 2014.
“Moreover, strains on sub-contractor availability persisted in June, although the latest rise in sub-contractor charges was the least marked for nine months,” it said. Related: 'At some point we will have no one coming into the construction industry'
“Moreover, strains on subcontractor availability persisted in June, although the latest rise in subcontractor charges was the least marked for nine months,” it said.
Stefan Friedhoff, a spokesman for Lloyds Bank’s commercial lending arm, said the industry was struggling to reap the benefits of the recovery as skills shortages and rising input prices squeezed profit margins.Stefan Friedhoff, a spokesman for Lloyds Bank’s commercial lending arm, said the industry was struggling to reap the benefits of the recovery as skills shortages and rising input prices squeezed profit margins.
“There is confidence in the market, particularly given the business environment has become more stable over the past two months. Despite this and record order books, however, ongoing price sensitivity continues to put margins under huge pressure,” he said.“There is confidence in the market, particularly given the business environment has become more stable over the past two months. Despite this and record order books, however, ongoing price sensitivity continues to put margins under huge pressure,” he said.
“Unfortunately, the causes of this – a shortage of suppliers and labour, project delays and demanding clients, among other things – are long-term industry issues likely to ensure slim margins remain for the foreseeable future.”“Unfortunately, the causes of this – a shortage of suppliers and labour, project delays and demanding clients, among other things – are long-term industry issues likely to ensure slim margins remain for the foreseeable future.”