Construction activity jumps in July – but employment dives as firms cut jobs

The UK construction industry stayed in strong positive territory for the second month in a row in July as builders continued to work after weeks of Covid-19 lockdown.

However, the employment levels also suffered a sustained decline as firms slashed jobs, despite improving levels of activity.

The closely followed IHS Markit/CIPS construction purchasing managers’ index (PMI) hit a reading of 58.1 last month, compared to 55.3 in June.

Analysts had predicted a score of 57, according to an average compiled by Pantheon Macroeconomics.

Any reading above 50 represents an expansion in business activity.

The reading represented the steepest growth in construction work since October 2015, driven by rapid expansion in the residential building sector.

Surveyed firms said this was driven by the release of pent-up demand and reduced anxiety among clients.

Tim Moore, economics director at IHS Markit, said: “Construction companies took another stride along the path to recovery in July as a rebound in house building helped to deliver the strongest overall growth across the sector for nearly five years.

“Civil engineering and commercial activity are also back in expansion, which has been mainly due to the restart of work that had been delayed during the second quarter of 2020.

“Survey respondents noted a boost to sales from easing lockdown measures across the UK economy and reduced anxiety about starting new projects.”

However, worries about the speed of the recovery led to a “sustained decline” in staffing numbers during the month, the survey said.

One in three firms, 34%, reported a fall in employment levels, as the winding down of the Government furlough scheme nears.

Duncan Brock, group director at the Chartered Institute of Procurement & Supply, said: “Though builders were slightly less optimistic about prospects for the year ahead compared to the previous month, recovering lost ground gives hope that the damage caused by the pandemic may be less entrenched if recovery continues along this robust path.

“However, with another sharp fall in staffing levels, the number of redundancies increasing and competition for raw materials resulting in higher costs, holes are already starting to appear just as the sector regains its strength.

“After a summer of this blistering return to growth, building companies should prepare for a chilly autumn as furlough schemes come to an end and the real strength of the UK economy is revealed.”