Buyers report further construction growth

Grant Prior 10 years ago

Construction buyers reported a continued recovery last month despite growth slowing down on March figures which saw new orders increasing at their fastest rate for four-and-a-half year.

The Markit/CIPS Construction Purchasing Managers’ Index for April dipped to 55.8 from 56.7 in March.

Any figure above 50 on the sentiment survey represents an increase in output.

The results continue to fly in the face of official construction output figures which showed a 3% fall during the first quarter of this year.

Buyers said employment levels rose for the second month in succession and confidence in the 12-month outlook remained much stronger than any time in 2011.

David Noble, Chief Executive Officer at the Chartered Institute of Purchasing & Supply, said: “This month’s Construction PMI figures point towards the continued recovery of the construction sector.

“However, despite good news for order books and a rise in purchasing activity since the start of the year, it’s worth remembering that there is still a long way to go to match the expectations of growth seen before the 2010 spending review.

“In particular, growth in new contracts won and improved confidence, have not yet been accompanied by comparable increases in employment, which may indicate some fragility in the sector for the longer-term. Performance in housing, although slightly higher than last month, remains the poor relation to commercial and civil engineering.

“Suppliers too are under pressure, having reduced capacity during the downturn, they are now struggling to replenish inventories. This has led to increased delivery times and adds a further drag on the industry as a whole.”

Tim Moore, Senior Economist at Markit said: “April saw another generally buoyant UK Construction PMI survey, with rates of output and new order growth close to March’s recent highs. Improved inflows of new work have also helped raise business expectations in the sector from the three-year low seen last Autumn.

“The upturn in businesses’ expectations on a year-ahead horizon represents something of an antidote to the news that the construction sector double-dipped in Q1.

“However, it should be noted that since the 2010 government spending review, the level of confidence in the construction industry has consistently run well below the average seen in the decade before the financial crisis, suggesting there has been a widespread loss of optimism since the deficit-fighting austerity measures were first announced.

“The worry is that the sector may suffer from a lack of large-scale new projects once current undertakings such as the Olympics are completed.

“Further evidence of underlying fragilities also persisted in the beleaguered housing sector where activity growth fell well short of the trend in the wider construction economy.

“Cautious job hiring trends meanwhile continued across the UK construction sector, with firms generally able to expand their business activity without needing to take on more staff. This perhaps reflected the deeper malaise in the sector, with excess capacity meaning that construction companies are looking for a much stronger pipeline of new projects before new employees are taken on in significant numbers.”

Jason Heath, construction finance specialist at Bibby Financial Services added: “Despite last week’s ONS statistics indicating the construction industry has seen a significant reduction in output, the latest Markit/CIPS survey shows that while output was slightly down from March it is still very much in growth territory.

“Although the UK is entering its first double-dip recession since 1975, the construction industry is generally looking buoyant as order books look healthy and are at levels close to March’s highs.

“The construction sector is a vital part of the UK economy and its success or failure will have a significant impact on the country’s finances. It is therefore crucial the industry has access to the flexible funding it needs to grow and succeed.”

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