Construction sector rebounds sharply as UK reopens
The UK construction sector beat expectations and returned to solid growth in June as coronavirus lockdown measures were eased further, according to a survey.
The closely watched IHS Markit/Cips construction purchasing managers’ index (PMI) surged to 55.3 in June from May’s severely weak reading of 28.9. It was the fastest pace of expansion since July 2018 and well above analysts’ expectations of a rise to 47.
Limits on the construction sector were first eased in the middle of May, giving it a headstart on much of the rest of the economy.
The UK’s coronavirus lockdown has been gradually weakened over the last month and a half, with the government seeking to strike a balance between people’s health and the economy.
“June’s survey data revealed a steep rebound in UK construction output as more sites began to reopen and the supply chain kicked into gear,” said Tim Moore, economics director at data firm IHS Markit.
“House-building led the way with the fastest rise in activity for nearly five years,” he said. “Commercial and civil engineering also joined in the recovery from the low point seen in April.”
New business volumes picked up marginally in June, ending a three-month decline. Yet growth in new orders was lower than the overall rise in activity, reflecting hesitancy among clients.
Employment and optimism remain subdued
Some worries persisted in June, however, as the economy continued to function well below its normal level.
IHS Markit and Cips, the Chartered Institute of Procurement & Supply, said firms laid off or furloughed workers again in June.
Optimism in the sector remained low by historical standards, although it hit its highest level since February. Exactly 46 per cent of the survey panel anticipated a rise in business activity, while 31 per cent predicted a reduction.
The IHS Markit/Cips survey spoke to 150 construction firms in the second half of the month.
Duncan Brock, group director at Cips, said: “Only two months ago the construction sector produced the worst results in the history of the PMI, and there are still some potholes.”
“Employment levels remained deflated, with reports of redundancies, furloughed staff and a reluctance to boost staff numbers.”
“But with a significant rise in the headline output number, it looks as though all the building blocks are there for the sector’s increasing health.”