Residential market supports strong construction industry performance in November

Figures from the Markit/CIPS UK Construction Purchase Managers’ Index showed that business activity and new projects increased at the strongest pace since March. However the rate of expansion was softer than the peaks seen back in 2014 and businesses in the sector had to contend with rising average cost burdens.

House building was the best performing category of UK construction output in November, although the pace of expansion had slipped to a three-month low. But there was a rebound in commercial activity, with positive figures for November ending a five-month period of decline.

UK construction companies reported a steep and accelerated rise in their cost burdens in November, with the rate of inflation the fastest for just over five-and-a-half years. This was overwhelmingly linked to supplier price hikes in response to exchange rate depreciation.

Tim Moore, senior economist at IHS Markit and author of the Markit/CIPS Construction PMI, said: “UK construction companies experienced a steady recovery in business activity during November, which continues the rebound from the downturn seen over the third quarter of 2016.

“The brighter picture reflected another solid contribution from residential building and renewed growth in commercial work, which some companies linked to a resumption of projects that had been delayed after the Brexit vote.”

David Noble, group chief executive officer at the Chartered Institute of Procurement and Supply, said: “Once again residential activity led the way, though at softer rates than those seen in October and at a more diminished rate than the survey’s long-range norm. Though this positive growth will provide some relief for the economy, continuing cost pressures will be a worry for the sector in the coming months.”

He added: “The impact of the weaker pound was widely felt in November, with cost inflation the strongest since early 2011. Higher prices were reported for a number of materials including bricks, blocks and slate, as businesses struggled with managing costs. Yet, in spite of this grip on precious margins, headcounts were increased and demand for subcontractors was also sustained.”