Building activity soars, despite Brexit fears

Growth in the construction industry in May was at its highest for more than a year, despite concerns over Brexit.

Activity in the residential sector rose at its fastest pace since December 2015, according to the latest Markit/CIPS Construction survey, with a rise in jobs and buying.

The results – up to 56 from the sluggish figure of 53.1 posted in April. Ratings below 50 indicate shrinkage in the industry, while above indicates growth.

But the results are still weaker than the post financial crisis record score of 64.6, in January 2014, and it is still too early to tell if the score signals a recovery in the market, said IHS Markit.

Housebuilding was the best performing sector in May, and a key driver of growth. Respondents to the PMI cited a strong pipeline of new development projects and resilient demand in the housing market.

Tackling the housing crisis has been a strong theme of the upcoming general election with both Labour and the Conservatives have promised to build a million more homes over the next five years.

Civil engineering and commercial building also saw modest increases in May, though these were overtaken by housing.

Import costs for materials increased in May, albeit more slowly than in previous months, and input price inflation fell to a seven month low, easing the pressure on buyers.

But businesses also expressed concern over economic uncertainty, which Markit said continues to deter client spending.

“A sustained rebound in residential building provides an encouraging sign that the recent a soft patch for property values has not deterred new housing supply,” said Tim Moore, senior economist at IHS Markit and author of the Markit/CIPS Construction PMI.

“Instead, strong labour market conditions, resilient demand and ultra-low mortgage rates appear to have helped boost work on residential development projects in May.”

Mark Robinson, chief executive of Scape Group, welcomed the news, but warned the next government would need to address the UK’s skills crisis.

“Today’s unexpected bounce back in construction growth is telling, as it suggests the sector could be growing immune to the political turmoil that has plagued British industry in the last year.

“Clearly, clients and contractors are not letting election uncertainty impact business decisions in the short term as activity rises at the fastest pace in 17 months. This confidence is likely to have been bolstered by commitments from all of the major parties on housebuilding, the northern powerhouse and strong infrastructure pipelines. 

 “This also marks what could be a significant Brexit bounce back. However it is not all plain sailing from here. A rapid upturn in new work could ramp up the workforce pressures many suppliers are already struggling with in the wake of the momentous skills crisis. The need to rapidly up-skill the nation will be top of the in-tray for the next government, and failure to address it could be economically costly and politically toxic, regardless of which party takes office on June 9th.”

“The need to rapidly up-skill the nation will be top of the in-tray for the next government, and failure to address it could be economically costly and politically toxic, regardless of which party takes office on June 9^th.”