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UK housing helps lift construction PMI

Activity in Britain’s construction industry rose much faster than expected in November due to an increase in housebuilding, according to a closely watched survey.

New orders and employment also rose at their fastest pace since June as optimism across much of the sector picked up from what was previously a five-year low.

The Purchasing Managers’ Index rose to 53.1 in the month, up from 50.8, with any reading above 50 consistent with growth.

That is a substantial improvement from the nadir of 48.1 in September and marks a sustained departure from the recessionary conditions wrought on the sector during the summer months.

Official UK growth figures for the third quarter of 2017 showed that the sector contracted for two consecutive quarters as a number of big commercial and infrastructure projects have come to an end without new work to replace them, meeting the definition of a recession.

However, the latest PMI surveys, which seek to represent “grass roots” surveys of the sector’s health, suggest construction has regained some momentum and returned to growth during the final three months of the year.

Commercial and civil engineering work is still contracting, but the rise in residential construction has dragged optimism in the industry up.

Civil engineering activity fell for the third successive month, the longest period of decline seen for over four years.

“It is extremely encouraging to see a bounce back in construction activity in November,” said Mark Robinson, Scape Group Chief Executive.

“Although for the time being growth is limited to residential housebuilding, the Government’s commitment to big ticket infrastructure spend such as the Cambridge – Milton Keynes – Oxford corridor, and a fresh £300mn for HS2 to accommodate the Northern Powerhouse and the Midlands Engine, will help to bring new opportunities forward.

“Public infrastructure investment will also help to create the right conditions for private sector investment too.”

The sector has been more sensitive to Brexit-related uncertainty than other industries, because construction projects take years to complete.

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A report jointly published by seven of the construction industry’s largest trade bodies warned last week that the decision to leave the EU had left the UK construction industry facing a “cliff edge” in terms of its access to EU workers.

Furthermore, businesses must anticipate what demand for offices and houses will be when a building is finished, rather than when construction begins.

The UK government’s Help to Buy equity loan scheme has made residential property a rare bright spot for the construction industry in recent months, with the policy supporting demand for new houses.

Sentiment within this segment of industry may be supported by the November budget statement over the coming months.

This saw the government announce close to £15bn of funding to support new housebuilding.

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