Construction sector grows at fastest pace since 2018

The UK construction sector expanded at its fastest rate since December 2018 in February, scoring 52.6 in the HIS Markit/Cips construction purchasing managers’ index (PMI), a substantial rise from January’s 48.4.

Any score above 50 indicates growth in a sector and the expansion was largely driven by house building activity, which increased by the most since July 2018. Meanwhile, commercial work output grew for the first time since November 2018.

Overall, new orders rose the most in just over four years on greater tender opportunities and the release of spending that had been delayed in the run-up to Brexit.

However, in contrast to the overall trend for construction output, civil engineering activity fell again during February. That said, the rate of decline was only marginal and the least marked for 13 months. Next week’s Budget will likely include commitments to increase public sector investment and higher infrastructure spending.

Purchasing activity also returned to growth in February, which mirrored the trend seen for construction output levels. However, stronger demand for inputs placed additional pressure on supply chains, with lead times lengthening to the greatest extent since October 2019.

According to IHS Markit, construction firms are upbeat about their growth prospects for the next 12 months, and although the degree of optimism has eased since January, it remains much stronger than that seen in the second half of 2019.

However, the sector still faces headwinds, chief of which is the Coronavirus, which could have a general impact on UK economic growth. And if there is a renewed economic slowdown, this could dampen the outlook for the sector.

Jon Stocker, General Practice Partner at Milsted Langdon, said: “The growth in the construction sector is positive news, with the latest figures representing a significant increase on January’s performance, providing a boost to the outlook for the sector in general. However increased growth and work in progress can bring about cashflow pressures and it is important to plan ahead.

“For help and advice with matters relating to the construction sector, contact our expert team today.”

 

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