UK’s December rebound

The UK’s construction sector rebounded in December, according to figures from a survey of construction purchasing managers, with the recovery led by commercial building activity.

Output growth followed a seven-month low in November as commercial construction rose at its fastest pace since October 2014, and construction companies have signalled a positive outlook for business conditions in 2016.

The Markit/CIPS UK Construction PMI (Purchasing Managers’ Index) – produced by financial information services provider Markit and the Chartered Institute of Procurement & Supply (CIPS) – is based on data compiled from monthly replies to questionnaires sent to purchasing executives in over 170 UK construction companies.

Data collected between 4 and 22 December, 2015, showed that UK construction companies ended 2015 with “a robust and accelerated expansion of overall business activity”, which Markit and CIPS said indicated a rebound from the slowdown recorded in November.

The headline seasonally-adjusted Markit/CIPS UK Construction PMI registered 57.8 in December, up from 55.3 in November.

Higher levels of construction output have been recorded by the survey since May 2013, but the overall rate of expansion was found to have remained slightly weaker than seen on average over this period.

Commercial

Commercial construction remained the best performing sub-category of activity in December, with the latest upturn reported to be the fastest since October 2014.

Markit and CIPS said that survey respondents noted that improving UK economic conditions continued to boost demand for commercial projects. Housing activity also increased at a robust rate that was much stronger than the 29-month low seen during November.

Meanwhile, a decline in civil engineering activity contrasted with the overall upward trend seen across the UK construction sector in December. The fall in civil engineering activity was only marginal, said Markit and CIPS, but this ended a seven-month period of sustained growth.

They said that December data signalled a robust and accelerated increase in new business volumes, mirroring the trend recorded for construction output at the end of 2015.

The latest rise in new work was the second-fastest since July, which survey respondents linked to favourable demand conditions and an improved willingness among clients to commit to new projects.

Optimism

Tim Moore, senior economist at Markit, said “Across the UK construction sector as a whole, the latest survey indicated a strong degree of optimism about the outlook for 2016, with firms mainly citing a strong pipeline commercial development projects and new housing starts.

Peter Vinden, managing director of The Vinden Partnership – a multi-disciplinary consultant company to the built environment – said, “The construction industry’s strong performance in December was a great way to end 2015.

“The number of new housing projects is also welcome news and I hope to see this sector continue to perform well over the next 12 months.”

He added, “If the level of optimism around the industry is anything to go by, we should see 2016 bring more growth and opportunities that will see construction play a significant part in driving the success of the UK economy.”

Richard Threlfall, UK head of infrastructure, building and construction at accountants KPMG, said, “With commercial building and housing activity leading the recovery, the only sub-sector in marginal decline is in civil engineering activity, but I am confident that will pick up quickly again given the huge pipeline of infrastructure work committed by the government.”

He added that the industry could expect higher spending by the UK government as it rushed to shore up flood defences and the repair damage left by recent storms.