Construction hope high despite sector still struggling
Hopes that house-builders might be starting to share in the pick-up elsewhere in the British economy went back on hold yesterday when an authoritative survey showed house-building activity shrinking at a faster pace last month.
But morale in the construction industry generally is now stronger than at any time since April 2007, according to the purchasing managers’ index for construction, compiled by Markit and the Chartered Institute of Purchasing and Supply.
Many construction companies believe an improving economy will boost their sales, the CIPS said. Activity continued to slow throughout the construction industry in July, but the pace of decline eased off for both commercial building and civil engineering.
A headline index number of 47.0, up from 44.5 in June, on a scale where anything under 50 indicates a decline, was the least bad outcome for 16 months.
New orders fell only slightly and several companies noted they are receiving more invitations to tender for work.
“The construction sector is being helped to a limited extent by the Government bringing forward some infrastructure spending as part of its efforts to boost the economy,” noted Howard Archer, chief UK and European economist at IHS Global Insight.
It is clear from the survey construction companies are still cutting their workforces sharply, albeit less so than in June, and using sub-contractors less.
David Noble, chief executive at the CIPS, commented: “Optimism is returning to the UK construction sector on the back of a perceived improvement in economic conditions. While the current situation still looks very bleak, an upturn looks much closer than it did just a few months ago.”
But he warned: “One area of concern is residential construction, which has fallen back dramatically after showing recent signs of improvement.
“The market will have to improve substantially before we see the level of new builds return to pre-credit crunch level. While access to credit and employment levels remain low, this is unlikely to happen soon.”