UK construction output returns to growth in September

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The construction sector saw a growth in output during September’s PMI, shaking off the post-Brexit slump…

According to the latest Markit/CIPS Construction Purchasing Managers’ Index (PMI), the construction sector saw growth in September after a poor few months following the referendum vote.

The figures show the PMI rose to 52.3 after falling to a low of 49.2 in August. Anything above 50 represents growth, so September’s figures will undoubtedly be welcomed in a sector that has been in contraction since May.

The figure also surpassed the estimated rate put forward by economist, who suggested the PMI would fall to 49.0 in September.

Tim Moore, economist at survey compiler IHS Markit said: “Construction firms appear reasonably optimistic about the near-term outlook, with confidence linked to the fastest rise in new orders since March.

“However, the sector remains on a much weaker growth trajectory than seen at the start of 2016,” Moore said.

He said this was due to subdued investment and the accelerated prices paid by construction firms for raw materials—caused by the weak pound.

The index showed a recovery in housebuilding, with new orders picking up. However, while both residential and civil engineering saw growth, commercial sector output fell for the fourth month in a row, representing the longest decline since early 2013.

Last week, the Bank of England suggested a slowdown in the housing market, with lenders approving fewer mortgages in nearly two years during August. However, the PMI reveals much positivity in the sector, with optimism among construction firms hitting a four-month high and employment rising for the first time since April.

The PMI comes hot on the heels of a government announcement earlier this week that aims to boost housebuilding. Communities Secretary Sajid Javid and Chancellor Philip Hammond announced £5bn would be made available for the sector under new government plans.

Randeesh Sandhu, CEO of residential finance provider Urban Exposure, commented on the latest PMI, stating: “The increase in construction PMI is the second piece of positive news for the housebuilding sector this week.

“Sajid Javid’s speech yesterday showed that this government is serious about addressing the UK housing shortage so we are encouraged that both activity in the sector and government policy are moving in the right direction at the same time.

“While some indicators such as recent BBA mortgage lending figures, which found that lending is now down 10 per cent since May and has fallen for three months in a row, point towards a slowdown, the combination of clear government support for SME developers and improving confidence bodes well for the sector going forward.”

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