New orders drive strongest growth of 2017 for British construction despite gloomy outlook

Jasper Jolly
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Confidence in the construction industry remained relatively buoyant (Source: Getty)

The British construction industry expanded at the fastest rate in four months in April, but doubts remain in the sector with the purchasing managers’ index (PMI) growth measure still far below the long-term average.

The construction PMI rose significantly above consensus forecast to hit 53.1 for April, up from the 52.2 reading recorded in March, according to IHS Markit.

Civil engineering activity rose to a 13-month high, while the amount of housebuilding also hit its highest point in 2017, but growth in commercial activity remained weak.

Read more: Slow growth for housing sector drags on British construction industry

A pick-up in new orders was one of the main drivers behind the rise beyond what economists expected, but it still undershot the improvement in the equivalent gauge of the manufacturing sector, which showed activity spike to a three-year high.

While a reading above 50 denotes an expansion in the sector, the long-term average reading of 54.5 was last hit at the beginning of 2016.

The construction industry struggled at the start of the year, with the Office for National Statistics (ONS) reporting it grew by only 0.2 per cent in the first quarter, below the economy-wide measure of 0.3 per cent output growth.

Construction makes up around 5.9 per cent of the UK’s economic output, the ONS says, although activity in the sector is often seen as a bellwether for wider growth.

Read more: Small construction firms shake off Brexit concerns as confidence rises

While levels of optimism remained at healthy levels according to the PMI survey, the measure of confidence eased back.

Max Jones, global corporates relationship director for construction at Lloyds Bank Commercial Banking, said: “Some of the nervousness is coming from contractors with a focus on infrastructure, where the pipeline remains strong. The success of Crossrail has shown that mega-projects can be delivered on time and on budget but there are concerns about how government decision-making on infrastructure may be affected given the focus on Brexit negotiations.

Paul Trigg, assistant head of risk underwriting at Euler Hermes, said: “Despite recent robust performance across construction, we expect the sector to see anaemic growth in the short to mid-term as concerns about falling inward investment levels, thinning long-term order books and access to skills grow.”

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