UK construction sector rebounds to growth after building work restarts

The UK construction industry surged back to growth in June as the phased restart of building work helped to drive a sharp turnaround for the sector.

The closely followed IHS Markit/CIPS construction purchasing managers’ index (PMI) surged to a reading of 55.3 last month, from 28.9 in May.

A consensus of analysts had forecast a reading of 46 for the month.

Any reading above 50 represents an expansion in business activity.

Tim Moore, economics director at IHS Markit, said: “June’s survey data revealed a steep rebound in UK construction output as more sites began to reopen and the supply chain kicked into gear.

“As the first major part of the UK economy to begin a phased return to work, the strong rebound in construction activity provides hope to other sectors that have suffered through the lockdown period.”

The influential survey signalled the steepest pace of growth for the sector since July 2018, as supply chains for the UK construction sector reopened following stoppages and business closures due to the lockdown.

Around 46% of survey respondents reported an increase in activity in residential building, while only 27% said they experienced lower activity.

Commercial work and civil engineering activity also returned to growth in June, although the rates of expansion were softer than those seen for house building.

New business volumes increased marginally for the first time since February.

However, it said that the rate of new order growth was softer than the general improvement in business activity, as firms reported a “hesitancy among clients and longer lead times to secure new contracts”.

Employment also fell amid worries about the longer term outlook for demand which resulted in cautious hiring policies and, in some cases, redundancies, as furlough arrangements ended.

Duncan Brock, group director at the Chartered Institute of Procurement & Supply (CIPS), said: “Only two months ago the construction sector produced the worst results in the history of the PMI, and there are still some potholes to navigate around as Government support for jobs is stripped away.

“Employment levels remained deflated, with reports of redundancies, furloughed staff and a reluctance to boost staff numbers when new order levels remained so flat.

“But with a significant rise in the headline output number, it looks as though all the building blocks are there for the sector’s increasing health.”

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