Construction rebounds as Brexit fears ease

by: Carmen Reichman
  • 04/10/2016
  • 0
Construction rebounds as Brexit fears ease
Residential building activity has risen for the first time since May, fuelling hopes that the Brexit-related uncertainty among clients has finally begun to ease.

There were more purchases of residential buildings in September than in the previous month, according to the Markit/CIPS UK Construction Purchasing Managers’ Index, marking the end of a four-month decline.

New orders for homes also rebounded, in what was the fastest increase in any of the past six months, the survey found.

June’s Brexit vote, which saw the UK decide for an exit from the European Union, had sent jitters through the housing market in the months immediately before and after the event.

However, while purchasing executives reported an increase in residential construction last month, the commercial sector continued to decline.

Author of the report and IHS Markit senior economist Tim Moore said: “Resilient housing market conditions and a renewed upturn in civil engineering activity helped to drive an overall improvement in construction output volumes for the first time since the EU referendum.

“Construction firms appear reasonably optimistic about the near-term outlook, with confidence linked to the fastest rise in new orders since March and a more upbeat economic newsflow in general.”

Survey respondents had cited improved confidence among clients as a major factor behind the growth in business.

Optimism amongst construction firms was also up, with almost half of respondents forecasting a rise in output over the year ahead, while 9% anticipated a reduction, the survey found.

Despite this, the sector was on a weaker growth trajectory than at the start of 2016, Moore said.

He explained: “Not only are UK construction companies feeling the impact of subdued investment spending relative to earlier this year, but the weak pound has contributed to a sharp acceleration in cost inflation. There were again widespread reports that domestic suppliers had acted quickly to pass on higher imported raw material costs, despite softer demand conditions in recent months.”

Property developer Redrow said the results were encouraging. “Given the desperate need for new homes in the UK, this is a strong step in the right direction, which should be bolstered further by this week’s announcement of fresh government support to increase new homes delivery,” said chief executive John Tutte.

Chancellor Philip Hammond and communities secretary Sajid Javid had announced a package of measures designed to reinvigorate the housing market at this week’s Conservative party conference.

The government plans to set aside £2bn for accelerated housebuilding and to roll out a £3bn fund to provide loans to small housebuilders, as originally announced by former chancellor George Osborne during his March Budget.

New planning rules will also make it easier to build on brownfield sites by giving automatic permission in principle for suitable sites, while enabling developers to swap old office buildings with new residential construction.

The industry responded to the measures with optimism, although they cautioned against relying too heavily on the new investments as a way to salvage the country’s housing crisis.

Tuttle said: “Any government policy that has the potential to continue to accelerate housebuilding is very welcome but, as ever, the devil is in the detail and we are watching closely to see how this unfolds in the run up to the Autumn Statement.”

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