UK construction firms have seen the fastest rebound in activity in five years over the past month, new figures suggest.
A bellwether survey of construction firm leaders showed a “sharp and accelerated expansion” of work in July, particularly in housebuilding, but it was not enough to stop a continued fall in employment.
Pent-up demand, the reopening of sites and supply chains and the wider easing of lockdown restrictions have helped firms expand after the upheaval of recent months, despite the continued health and economic crisis.
The headline figure on a purchasing managers’ index (PMI) for the sector rose to 58.1 in July from 55.3 in June, which had marked a return to growth after a 28.9 reading in May.
Figures above 50 suggest most firms are growing and below 50 show decline on the closely watched index, based on a survey carried out by IHS Markit and the Chartered Institute of Procurement & Supply (CIPS).
But one in three firms surveyed reported a decline in employment in the past month, with around the same proportion expecting output to fall over the next 12 months.
Some said clients remained "apprehensive" about committing to new projects, sparking concerns about whether they would have enough new work to replace completed jobs.
"Concerns about the pipeline of new work across the construction sector and intense pressure on margins go a long way to explain the sharp and accelerated fall in employment numbers reported during July," said Tim Moore, economics director of IHS Markit.
However, 43% of firms expected output to rise in the next year. The UK government has said construction is central to its economic recovery plans.
On Tuesday (4 August) the government announced more than 300 residential and infrastructure projects will share a £900m “building fund.” Officials say it will create up to 45,000 homes and create up to 85,000 jobs. Ministers have also promised a radical overhaul of planning rules in England this week.
The PMI figures come after similar survey figures for UK manufacturers on Monday (3 August) showed new orders growing at the fastest pace since late 2018, with a continued rebound in activity.
The headline factory PMI figure hit 53.3, though IHS Markit said it would take several months of growth “to fully recoup the output lost since the start of the pandemic.”
The bleak wider economic climate may threaten growth in months to come however, with UK recovery expected to remain weak and unemployment expected to edge higher as the virus continues to hobble activity. The International Monetary Fund (IMF) has predicted the UK economy is likely to shrink by 10.2% this year.
Duncan Brock, group director of the CIPS, said construction firms "should prepare for a chilly autumn" as the furlough scheme is wound down and an easing in pent-up lockdown demand reveals the economy's "real strength.”
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