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Confidence hits new high as firms weather Carillion storm

Confidence in future work is at an 11-month high in the construction industry according to the latest purchasing managers’ index.

An increase in activity in April, coupled with the first monthly increase in new orders in 2018, contributed to confidence hitting its highest level since May 2017.

Chartered Institute of Procurement and Supply group director Duncan Brock said: “There were some positives reported by construction firms in April as optimism rose to its highest level since May 2017 and an increase in workforces was reported in anticipation of a better second quarter of the year.”

Lloyds Bank global corporate relationship director for construction Max Jones said the industry appeared to be weathering Carillion’s collapse better than expected.

“Top-tier contractors have been insulated from some of the shocks felt further down the supply chain, but smaller firms too are proving robust in the face of challenging economic conditions and Carillion’s collapse,” he said.

The IHS Markit / CIPS construction PMI found that the sector rebounded in April as the activity index hit 52.5, having plummeted to a 20-month low of 47 in March.

A figure above 50 means activity is increasing, while below 50 signals a contraction.

Higher activity was expected after March’s bad weather, but April’s rebound was seen as lacklustre by some.

IHS Markit associate director Tim Moore said: “While temporary factors make it difficult to gauge underlying momentum, the recovery from March’s low point is somewhat underwhelming and provides an indication that the construction sector has been treading water at the very best in recent months.”

Lloyds’ Mr Jones added that the industry was “struggling to grow”.

Housebuilding was the best-performing sector in April with growth at an 11-month high.

The civil engineering and commercial sectors showed a “modest” increase in activity after deep declines in April, with a lack of new big projects dragging on growth.

“What the sector needs now is more widespread client confidence and big-ticket projects to follow suit,” Mr Brock said.

CPA senior economist Rebecca Larkin said the commercial sector was likely to continue to struggle in 2018.

“It is important to remember that whilst the commercial sector will also register a snow-related rebound in the next few months, the sharp decline in new contracts and orders since the EU referendum is likely to keep activity subdued throughout the latter part of the year,” she said.

The CPA’s recent forecast for 2018 suggested growth in the infrastructure and housing sectors would balance out declines in commercial and public sector works over the year.

Commenting on the figures, Scape chief executive Mark Robinson said: “After a turbulent start to 2018 for the industry all eyes are on construction performance – but today’s data is very indicative that firms are fighting back and bucking expectations, citing the same optimism that we saw towards the back end of last year.”

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