Construction sector soars as delayed building projects get green light

New orders in the UK construction sector have soared to levels not seen in more than four years, latest data shows.

The closely followed IHS Markit/CIPS Purchasing Managers’ Index (PMI) for February hit 52.6 – a jump from 48.4 in January. Anything below 50 is a sign of a sector in contraction

Businesses had been holding off starting major projects while there was uncertainty around the general election and Brexit.

But with the Tories securing a majority and Brexit moving to negotiations on a trade deal, companies are showing signs they are willing to start spending again.

Tim Moore, economics director at IHS Markit, said: “Growth of business activity was stronger than at any time since the end of 2018, supported by the fastest rise in new orders for just over four years.

“Some construction firms suggested that the recovery in output would have been even stronger had there not been disruptions on site from severe weather conditions in February.

“The fly in the ointment is the uncertain impact of the coronavirus outbreak on UK economic growth prospects. A renewed slowdown could see domestic investment spending put back on hold and dampen the outlook for the UK construction sector.”

Residential building remained the best-performing category, with the strongest expansion of house-building activity since July 2018, and there was also a return to growth for commercial work.

However, civil engineering remained in decline, although there was confidence in the sector that contract awards from HS2 and other major transport projects will help 2020.

Duncan Brock, group director at the Chartered Institute of Procurement & Supply, warned that if growth continues to rise at a similar pace, it could have knock-on effects.

He added: “Should there be another sudden rise in purchasing activity in March, we are likely to see more challenges in supply chains, until suppliers have a chance to catch up.

“Given the slowdown in the global economy and potential coronavirus impacts, the sector could struggle to maintain February’s strong performance and may experience slower progress as we head into spring.”

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