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Construction growth hits four-month high

New residential work helped construction activity edge up to a four-month high in November, according to the latest IHS Markit / CIPS purchasing managers index.

The index moved higher to 53.4 last month, (where 50 equals no change) up from 53.2 in October.

The figure represented the strongest level of activity since July, with commercial and civil engineering work also on the rise.

The report did state however that Brexit uncertainty had held back new order growth, with other firms citing delays to public sector spending decisions.

Survey respondents also commented on higher transportation costs and rising staff salaries. The overall rate of input price inflation was the fastest since June.

IHS Markit economics associate director Tim Moore said: “November data indicates that the UK construction sector remains in expansion mode, with resilient business activity trends seen for housing, commercial and civil engineering activity.

“The latest overall rise in construction output was the fastest since July, helped by a stronger contribution to growth from house building activity.

“Higher levels of new work were recorded for the sixth-month-running in November, which resulted in a robust and accelerated rise in staffing numbers.”

Mr Moore continued: “The latest upturn in employment was the fastest for almost three years. A number of construction firms noted that greater demand for staff had led to upward pressure on salaries in November.”

Scape Group chief executive Mark Robinson said that the figures revealed the sector is not seizing up, despite Brexit fears

“The construction sector defied all expectations in November as Brexit hysteria reached fever pitch,” Mr Robinson said.

“Clients are recognising that, whatever the weather, we need new homes, we need schools and we need new roads. And with growth reaching a four-month high – evidently, the construction sector is not seizing up.

“But that’s not to say it is all plain sailing from here. While it’s fantastic to see new work picking up, the industry risks not having the manpower to deliver the projects.”

Jonathan Garrett, associate director at Lloyds Bank Commercial Banking’s infrastructure and construction team, said: “The uptick in the index will lift the spirits of some in construction at a time of uncertainty.

“As a UK-focused sector exposed to the cycles of the economy, there is undeniably a sense of nervousness and firms are in defensive mode, cutting costs wherever possible.

“The release of the government’s national infrastructure and construction pipeline is a reminder that flagship projects remain a reliable source of work for contractors in this area of the market. For them, order books are holding up well, though there is some concern about the visibility of work from 2020 onwards.

“The most forward-thinking contractors are focusing on innovation, such as offsite construction, with major infrastructure clients aiming to prove that such developments are the key to better-quality but lower-cost construction.

“In the long-term, this should improve operators’ margins, which are typically 2 per cent or less.”

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