The latest Markit/CIPS UK Construction PMI survey, which covers November, has found that business activity is rising at the fastest rate since March and there is a welcome pick up in commercial work for first time in six months, however, suppliers continue to pass on higher imported raw material costs.
The seasonally adjusted Markit/CIPS UK Construction Purchasing Managers’ Index (PMI) picked up slightly to 52.8 in November, from 52.6 in October, thereby signalling an expansion of total business activity for the third month running. Reports from survey respondents cited improved order books, alongside resilient client confidence and strong demand for residential projects. There were again reports that heightened economic uncertainty was a key factor weighing on output growth across the construction sector.
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.
“November’s survey data revealed the strongest rise in overall new business volumes since March.
However, lingering economic uncertainty and subdued investor sentiment meant that optimism
towards the year-ahead outlook remained close to its lowest since early-2013.
“Input cost inflation accelerated to its fastest for five-and-a-half years, driven by sharply rising imported raw material prices. A number of firms cited uncertainty related to supplier price hikes as an emerging threat to the construction sector, with survey respondents commenting on difficulties forecasting project costs against a backdrop of rapidly changing inflationary pressures.”
David Noble, Group Chief Executive Officer at the Chartered Institute of Procurement & Supply,
said: “Purchasing activity grew at its fastest pace since the beginning of the year as stronger workflows and tenders materialising into actual projects prompted increased levels of stock building. This resulted in a sluggish response from suppliers, with the fastest lengthening of delivery times since June, as pressure on capacity and low stocks impacted on demand.
“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.
“Reports of lingering uncertainty around the progress of Brexit negotiations had business optimism divided, where only 45% of respondents expected a rise in activity next year – one of the lowest since the
middle of 2013. And, as commentators warn about more inflationary impacts next year, the sector will be concerned that decisions from policymakers must ensure these effects are minimalised so that growth