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Fastest rise in construction activity for nearly two years

Total Activity Index

Strong rebound in UK construction output as reopening of sites gathered pace during June

JUNE data pointed to a sharp turnaround in the performance of the UK construction sector as the phased restart of work on site helped to lift output volumes and boost business confidence. At the same time, new orders stabilized after three months of sharp declines and purchasing activity expanded at the fastest rate since December 2015.

The headline seasonally adjusted IHS Markit/CIPS UK Construction PMI Total Activity Index jumped to 55.3 in June, from 28.9 in May, to signal a strong increase in total construction output. Moreover, the latest reading signalled the steepest pace of expansion since July 2018.

Residential building was the best-performing area of construction activity in June. Around 46% of survey respondents noted an increase in housing activity, while only 27% experienced a reduction. The latest expansion of residential construction work was the steepest for just under five years. Commercial work and civil engineering activity also returned to growth in June, although the rates of expansion were softer than seen for house building.

New business volumes increased marginally in June, which ended a three-month period of decline. However, the rate of new order growth was far weaker than seen for business activity, reflecting ongoing hesitancy among clients and longer lead-times to secure new contracts. However, a number of construction firms did note that new work related to infrastructure projects was a key source of growth in June.

The index measuring business expectations for the year ahead remained historically subdued, but climbed to its highest since February amid a boost from the reopening of work on site. Exactly 46% of the survey panel anticipate a rise in business activity, while 31% forecast a reduction, largely due to concerns about the wider UK economic outlook.

Tim Moore, economics director at IHS Markit, which compiles the survey, 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. House building led the way with the fastest rise in activity for nearly five years, while commercial and civil engineering also joined in the recovery from the low point seen in April.

‘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. While it has taken time for the construction supply chain to adapt and rebuild capacity after widespread business closures, there is now clear evidence that a return to growth has been achieved.’

Duncan Brock, group director at the Chartered Institute of Procurement & Supply, said: ‘Builders were the stars of the UK economy in June with the fastest rise in purchasing activity in almost five years, as pent-up building plans were unleashed following the easing of lockdown measures. Housing led the way with the other main sectors closely behind as several larger infrastructure projects were also on the move.

‘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. 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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