The UK's construction sector crept back into positive territory last month

 
Emma Haslett
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Building Development Along The Thames In East London
The sector was boosted by housebuilding. (Source: Getty)

The pound edged off lows in morning trading after a closely-watched index suggested the UK's construction industry showed a very slight expansion in October.

IHS Markit's purchasing managers' index for the construction industry rose to 50.8 in October, up from 48.1 in September and ahead of expectations of 48.0. Any figure below 50 denotes a contraction in the sector.

The pound briefly rose to $1.3259 against the dollar, before sinking back to $1.3242, 0.02 per cent lower.

Tim Moore, associate director at IHS Markit, attributed the rise to the housebuilding sector.

“Greater house building was the sole bright spot in an otherwise difficult month for the construction sector," he said.

"Sustained declines in civil engineering and commercial activity meant that large areas of the building industry have become stuck in a rut.

“Reduced tender opportunities and fragile demand are placing a dark cloud over the near-term outlook. October survey data indicated that UK construction companies are now the least confident about their forthcoming workloads since December 2012. Staff recruitment has also begun to tail off as construction companies head into the winter with heightened concern about demand conditions."

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However, despite the fragile nature of the expansion, the higher-than-expected figure adds to yesterday's strong reading for the manufacturing sector to provide further suggestion the UK's economy can withstand an interest rate hike. The Bank of England's monetary policy committee (MPC) is widely expected to raise rates for the first time in a decade at a meeting today.

"Those at the top of the supply chain are not dwelling too much on Brexit uncertainty and this PMI suggests September’s [negative] reading may have been a blip," said Mike Chappell, global corporates managing director for construction at Lloyds Bank Commercial Banking.

“While the Budget is only a few weeks away, contractors are operating on the basis that there will be no construction-friendly giveaways in the chancellor’s statement. Anything that materialises will therefore be a bonus.

“Firms continue to focus on bidding discipline in an effort to avoid a repeat of the issues that plagued the sector after the financial crisis. Many contract cycles are now much shorter, reducing risk and hopefully putting the industry on a firmer footing in the face of the ongoing uncertainty.”

Read more: Small construction firms warn growth is grinding to a halt

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