U.K. construction companies’ business activity levels witness stronger growth in July

Construction firms in the U.K. saw a stronger growth of business activity levels in July, supported by the most rapid rise in residential work for just more than two-and-a-half years. The seasonally adjusted IHS Markit/CIPS UK Construction PMI rose sharply from 53.1 in June to 55.8 in July. This hinted at the fastest rise in overall construction output since May 2017. Survey respondents commented on improving demand conditions, higher volumes of new project starts and, in some cases, a degree of catch-up from the bad weather earlier in 2018.

House building was the best performing category of construction activity in July, with the latest upturn the strongest since December 2015. Commercial work also rebounded at the most rapid pace for just over two-and-a-half years. Civil engineering activity rose just moderately, although at a sharper rate than in June. Construction firms noted that a lack of work to replace completed projects continued to hold back growth in the civil engineering sub-sector.

The data for July indicated towards the most solid rise in total new orders throughout the construction sector since May 2017. Survey respondents noted that a general rebound in client demand had led to successful contract negotiations of larger scale projects. In spite of a rise in tender opportunities, construction firms are wary regarding the year-ahead business outlook.

The extent of positive confidence about future workloads was the same since June and stayed softer than the long-term survey average. Anecdotal evidence implied that Brexit-related uncertainty continued to hold back business optimism in July.

In the meantime, the latest survey showed that rising sales volumes aided in stimulating job creation in the construction sector. The pace of employment growth was the most rapid since December 2015. Input purchasing also expanded at the strongest rate for just over two-and-a-half years. Greater purchasing activity led to the sharpest fall in supplier performance since July 2017.

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