By Daniel Hunter
UK construction companies indicated a continued recovery in business activity and new order inflows in April, again led by work on commercial projects.
This in turn contributed to employment growth for the second month running, and confidence in the 12-month outlook remained much stronger than throughout much of 2011.
The seasonally adjusted Markit/CIPS UK Construction Purchasing Managers’ Index (PMI) for April signalled that activity grew at a slower rate than the 21-month high seen in March, when good weather had helped boost activity levels. However, at 55.8, down from 56.7 in the previous month, the latest index was still comfortably above the 50.0 no- change mark.
Higher levels of business activity were recorded in all three broad areas of the construction economy, with the strongest pace of expansion again seen in the commercial sector, followed by civil engineering. In contrast, growth of residential building remained only marginal and, despite picking up since March, remained much weaker than the overall UK construction sector trend.
“April saw another generally buoyant UK Construction PMI survey, with rates of output and new order growth close to March’s recent highs. Improved inflows of new work have also helped raise business expectations in the sector from the three-year low seen last Autumn," Tim Moore, Senior Economist at Markit said.
“The upturn in businesses’ expectations on a year- ahead horizon represents something of an antidote to the news that the construction sector double- dipped in Q1. However, it should be noted that since the 2010 government spending review, the level of confidence in the construction industry has consistently run well below the average seen in the decade before the financial crisis, suggesting there has been a widespread loss of optimism since the deficit-fighting austerity measures were first announced.
"The worry is that the sector may suffer from a lack of large-scale new projects once current undertakings such as the Olympics are completed. Further evidence of underlying fragilities also persisted in the beleaguered housing sector where activity growth fell well short of the trend in the wider construction economy.
“Cautious job hiring trends meanwhile continued across the UK construction sector, with firms generally able to expand their business activity without needing to take on more staff. This perhaps reflected the deeper malaise in the sector, with excess capacity meaning that construction companies are looking for a much stronger pipeline of new projects before new employees are taken on in significant numbers.”
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