Construction sector firing on all cylinders

The UK construction sector output has risen at its fastest pace for five months, according to the latest IHS Markit’s purchasing managers’ index (PMI).

Despite analysis predicting a much lower reading of 51, the PMI increased to 53 in November, well above the 50 level below which suggests contraction in the sector.

The November data shows business activity rising at the strongest rate since June, with new orders and employment numbers also increasing to the greatest extent in five months.

House building projects were again the primary growth engine for construction activity, with resilient demand and a supportive policy backdrop driving the robust and accelerated upturn in residential work. However, commercial building and civil engineering both contracted.

Tim Moore, Associate Director at IHS Markit and author of the IHS Markit/CIPS Construction PMI comments: “Construction firms reported that heightened economic and political uncertainty continued to hold back commercial development activity.

“The latest drop in civil engineering was linked to a recent lack of tender opportunities for infrastructure-related projects.

“Business optimism across the construction sector remained relatively subdued, but picked up from the near five-year low seen in October.”

Duncan Brock, Director of Customer Relationships at the Chartered Institute of Procurement & Supply, adds: “It appears that policy support and a small recovery in the UK economy has boosted sentiment and encouraged clients to come out of their shells and start building again. The housing sector was the primary driver of growth increasing at the fastest rate for almost half a year.

“However it is private sector companies that need to commit to big ticket spending, with commercial development still underperforming as persistent Brexit uncertainty continues to bite.”

Mr Brock went on to add that, given the overall signs of improvement, “perhaps the darkest days are behind the sector with fresh impetus on the horizon for the New Year”.

In this volatile economic landscape, it is essential that UK SME business owners maintain effective management of their company’s working capital and put processes in place to survive and thrive in challenging times.

Contact our specialist advisers at Beavis Morgan for guidance and strategic advice to help in formulating plans for your business in order to strengthen its prospects of success, achieve growth and maximise wealth. Our partner business, BM Structured Finance, is also available to help with sourcing and restructuring debt finance for SME businesses.

For further information, contact Steve Govey or your usual Beavis Morgan Partner.