Construction 'no longer the weakest link' in economy

Construction activity grew strongly again in September, with housebuilding growing at its fastest pace for almost a decade, according to the latest Markit/CIPS Index.

The index posted 58.9 in September, down only fractionally on August’s near six-year high of 59.1 and well above the neutral 50 value that separates contraction from expansion.

Housing construction grew at its fastest pace since November 2003, while optimism across the industry about business outlook reached its highest level since April 2010.

This boosted employment numbers in the construction sector for the fourth consecutive month, and the rate of job creation reached its fastest for just under six years.

Tim Moore, senior economist at Markit, said: “Construction is no longer the weakest link in the UK economy. The third quarter of 2013 ended with output growth riding high amid greater spending on infrastructure projects and resurgent house building activity.

“The reversal in fortunes has spanned commercial, residential and public sector construction projects.

“Moreover, builders are confident that a tide of new tender opportunities will continue to lift the construction sector in the months ahead, supported by improved development funding conditions and better underlying economic conditions.

“September’s survey suggested that constructors are beginning to react with confidence to the more positive landscape for the sector, as job creation and input buying both rose at robust rates over the month.”

David Noble, chief executive at the Chartered Institute of Purchasing & Supply, said: “The construction sector is firing on all cylinders.

“Growth in UK house building hit heights not seen for ten years in September, and was supported by a solid acceleration in business from commercial construction, whilst growth in civil engineering remains well above the long run average, rounding off the best quarter of growth in construction since Q2 2010.

“Confidence is now at its strongest in almost 3 and a half years building strong momentum going into the final quarter.

“Having been in the doldrums for so long, builders are using this renewal as a platform to invest, with employment seeing the most dramatic upturn in close to 6 years.

“Inevitably, purchasing levels have also increased, but the adverse effect of this is increased pressure on suppliers to meet growing levels of demand, to the extent that their performance deteriorated at the fastest rate for 16 years.

“These pressures, along with increased cost burdens have the potential to act as a brake on the sector, but should not overshadow the overwhelmingly positive picture for UK construction.”