Britain gets building again: Construction firms see new orders rise to the highest level since 2015 amid post-election confidence boost
- New orders in sector rise at the fastest pace for just over four years
- Activity in housebuilding swelled to the highest level since July 2018
- Reduced uncertainty has given the economy a boost, expert claims
- Coronavirus could potentially hamper growth in the sector, IHS Markit says
Britain’s construction companies enjoyed the biggest rise in new orders since December 2015 last month, new data shows.
The best performing sub-sector was housebuilding, which saw activity grow at the fastest pace since July 2018, after eight months of contraction.
The construction sector as a whole grew at the fastest pace for just over a year in February, the latest IHS Markit/Cips UK construction purchasing managers’ index reveals.
The findings suggest there is ‘anecdotal’ evidence to suggest the boost transpired as a result of post-election improvements in business confidence and the release of ‘pent-up demand’ for new projects.
New orders: Britain’s construction companies enjoyed the biggest rise in new orders since December 2015 last month
Howard Archer, chief economist at the EY Item Club, said: ‘With the manufacturing and ‘flash’ services surveys also showing activity in February expanding at the equal fastest rate for 17 months, today’s improved construction PMI adds to the impression that reduced uncertainties have given the economy a significant lift in the first quarter.’
In the better than expected construction results, the index increased from 48.4 in January to 52.6 last month. A reading of 50 or above indicates growth and last month marked the first time since April 2019 that the figure has registered growth.
Last month’s hefty rise in new orders within the construction sector follows nine months of declining workloads.
On the up: Housebuilding activity rose at the fastest pace since July 2018, new figures show
Housebuilding activity swelled to the highest level since July 2018 in February, with residential building retaining its accolade as the strongest performing in the sector.
Earlier this week, the Bank of England revealed that mortgage approvals rose to a three-year high in January.
However, some experts warned that poor weather last month had led to delays on some building sites, acting as a ‘brake on growth.’
Growth: Sub-sector growth levels within the construction sector over the last few years
Construction: Activity in the construction sector since the year 2000
Commercial construction levels for last month were similarly upbeat, rising at the fastest pace since November 2018.
The picture remains less rosy for the commercial engineering sub-sector, which saw activity fall again last month. That said, the pace of the decline was marginal and the ‘least marked’ for 13 months.
Survey respondents reporting growth pointed to greater tender opportunities and the release of spending that had been delayed in the run up to Brexit. ‘There were also reports citing a boost from increased infrastructure contract awards, including those related to HS2’, Markit said.
The fly in the ointment is the uncertain impact of the coronavirus outbreak – Tim Moore, IHS Markit
Demand for sub-contractors picked up for the second month running and at the fastest pace since December 2018.
Looking ahead, most construction companies are ‘upbeat’ about their growth prospects and much more optimistic than in the latter half of last year.
Tim Moore, economics director at IHS Markit, said: ‘February’s survey data adds to signs that the UK construction sector has started to rebound after a downturn through the second half of last year.’
He added: ‘While construction order books have begun to recover in the opening part of 2020, the fly in the ointment is the uncertain impact of the coronavirus outbreak on UK economic growth prospects.
‘A renewed slowdown could see domestic investment spending put back on hold and dampen the outlook for the UK construction sector.’