Major Contractors Remain Upbeat
ACTIVITY in the UK construction sector in December 2014 grew at its slowest pace since July 2013 (for 17 months). But it remains robust thanks to continued growth in housebuilding, says a new survey from Markit/CIPS purchasing managers’ index (PMI).
The December data highlighted divergent trends between the three broad categories of construction output monitored by the survey. House building activity remained the strongest performing sub-category, although the pace of expansion moderated to its least marked since June 2013.
Commercial construction also increased at a solid pace, albeit slower than in the previous month. Meanwhile, civil engineering activity decreased slightly, thereby ending a 17-month period of continuous expansion.
Construction companies recorded a solid increase in new business volumes during December.
Anecdotal evidence pointed to strong demand for new residential development and a continued recovery in tenders for commercial projects. However, the rate of overall new order growth slowed for the sixth successive month to its weakest since June 2013.
Robust workloads and a sustained rebound in business activity contributed to a further sharp rise in staff recruitment at the end of the year.
The rate of job creation was slightly less marked than in November, but still well above the survey’s historical average. Moreover, a number of firms highlighted worsening skill shortages across the construction sector.
Reflecting this, sub-contractor availability decreased at a sharp and accelerated pace in December. Sub-contractor pay increased at the second-fastest pace since the survey began in April 1997 (exceeded only by November’s record high).
More than half of the survey panel (52%) anticipate a rise in business activity over the course of 2015, while only 13% forecast a reduction.
Although the latest survey indicates strong underlying business confidence within the UK construction sector, the balance of firms expecting growth over the year ahead was the lowest recorded since August 2013.
The weakest construction sub-sector in December was civil engineering, which reported a fall in output for the first time since May 2013. Despite the slowdown in December, Markit said housebuilders overall had enjoyed their best year since 1997.
Construction companies also reported ‘a solid increase in new business volumes in December’, Markit said.
Meanwhile, economists are forecasting that after several years of falling real wages, 2015 might bring the first year that the UK sees widespread increases in pay since the 2008 financial crisis.
Uncertainty surrounding the general election later this year was expected to subdue confidence.
Tim Moore, senior economist at Markit, said: ‘A sharp recovery in housebuilding, as well as resurgent demand for commercial development projects, continued to boost staff recruitment and sub-contractor pay rates across the construction sector in December.
‘While new business growth moderated to its lowest for a year-and-a-half in December, UK construction firms are still highly upbeat about their prospects for output growth in 2015.’
This article has been reproduced from the Contract Flooring Journal. You can find them at www.contractflooringjournal.co.uk.