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Construction rebounds – defying Brexit forecasts

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CONSTRUCTION ACTIVITY rebounded in September for the first time since May driven by a recovery in residential building, new data shows, defying predictions of a post-Brexit house price collapse.

Markit research on business activity last month also revealed that new orders also recovered, ending a four-month period of sustained decline.

The purchasing managers’ index (PMI) for the sector came in at 52.3 for September, well above the 50 score that marks stagnation. It was also above the 49.2 recorded in August and comfortably above the 49 expected by economists.

The latest reading was well above July’s seven-year low following the UK referendum decision to exit the EU.

“UK construction companies moved back into expansion mode during September, led by a swift recovery in residential building from the three-anda-half year low recorded in June,” said Tim Moore, senior economist at IHS Markit and author of the Markit/CIPS Construction PMI.

Respondents to the survey pointed to renewed confidence among clients and a reduced drag on demand from Brexit-related uncertainty.

Construction companies said they expected a further recovery over the next 12 months, with optimism the strongest since May. Just under half of the survey panel forecast a rise in output over the year ahead, while only 9% anticipated a reduction.

“A number of survey respondents noted that Brexit-related anxiety has receded among clients, although it remained a factor behind the ongoing decline in commercial building work,” Moore said, adding that firms are feeling the impact of subdued investment spending.

Home Builders Fund boost

The residential sector was likely buoyed by chancellor Philip Hammond’s announcement this week that the government would opening a £3bn Home Builders Fund to help build more than 225,000 new homes.

“It is encouraging to see that new order books are increasing for the first time since April, once again underlining that confidence is returning in the sector despite the downturn in commercial construction activity,” said Kelly Boorman, head of construction at RSM.

“There are, however, some clouds on the horizon. The news today that the pound has hit a 31 year low against the US dollar will heighten concerns that the price of imported construction materials will rise even further,” Boorman added.

 

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Jimmy Eyerman...Chief Financial Officer, EDM Group, USA