Commercial construction at highest level in five months

Commercial work in the UK construction sector was at its highest in five months in August, according to the latest Markit/CIPS UK Construction PMI survey.

The industry barometer found that of the three sub-categories of construction work, residential construction had the fastest pace of expansion, while commercial construction reached its highest level since March.

The seasonally adjusted output index registered 57.3 in August, up from 57.1 the previous month and well above the neutral 50.0 threshold which separates expansion from contraction.

More than half of the survey panel (53%) said they anticipate a rise in business activity over the next 12 months, while only 5% forecast a reduction.

Although the degree of optimism remained below June’s 11-year high, the latest reading was comfortably above the long-run survey average.

Sub-contractor usage also picked up again, with the pace of expansion the fastest since February.

The latest survey highlighted that sub-contractor charges rose sharply.

Stefan Friedhoff, global corporates managing director for construction at Lloyds Bank Commercial Banking, said: “Encouragingly, contractors are now far more selective in the way they bid for work, so although pipelines are healthy, firms are exercising restraint.

“In the long-term this should boost margins and, most importantly of all, ensure a more robust construction sector.

“The fundamentals in the industry are sound and this is fuelling a bullishness about potential output for the remainder of the year.”