In October, the Purchasing Managers' Index (PMI) compiled by Markit and the Chartered Institute of Purchasing and Supply (CIPS) hit its highest level for five months - but what was behind the unexpected rise? Many economists had predicted further stagnation for the UK's construction sector and anticipated a similar picture to the one seen in September. Markit economist and author of the UK construction PMI Sarah Bingham stated: "Commercial-based construction output was the principal driver of overall growth, maintaining the relatively solid trend of recent months." She added that there was little change in the civil engineering sector, while the housing market is bringing up the rear.
Meanwhile, analysis published by Glenigan in October may offer some further insight into the reasons behind the surprising improvement in the UK's construction industry. The firm recorded a four per cent rise in the number of building projects started onsite during the third quarter of 2011, noting that infrastructure schemes in particular were on the up. The company highlighted road and rail contracts in the south-west and south-east of the country, pointing out that these have helped buoy the sector's performance.
Research released by Glenigan earlier this month also singled out infrastructure initiatives as being important to construction output. The organisation noted that the approval of several Crossrail projects in and around London over the summer is key and will create "a major source of work throughout the next few years". The Markit/CIPS report revealed that the boost in activity was "supported by renewed growth of new business", with the increase in the number of new orders in October compared to September described as "robust". Among the factors cited as assisting the rise in demand were "competitive quotations and strong company reputations".
However, many industry commentators are not expecting the improvement to be prolonged. Director of external affairs at the Federation of Master Builders Brian Berry commented that one of the reasons the Construction PMI hit its highest level since May is because "we're looking at a very low benchmark". He predicted that concerns over the extent of government cuts to public spending, as well as the underlying weakness of the house building sector, will contribute to less positive figures over the coming months.
- Monday 14 November 2011