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uk construction sector shows strong rebound.

PMI figures for June show the construction sector sharply rebounding as easing lockdown and the phased return to work saw the IHS Markit/Cips UK Construction index rise to 55.3% from 28.9% the previous month. Those figures confirm that UK construction is outperforming the Eurozone and seeing the steepest expansion since 2018. New orders have also stabilised and purchasing activity expanded at a rate not seen since December 2015.

This steep V shaped rebound is indicative of sites reopening and supply chains finally kicking into gear after the Covid-19 lockdown. House building leads the way with the biggest rise in activity for just under 5 years.

This increase is above the 47% forecast by economists in a Reuters poll and the 50 mark that is an indicator of the majority of businesses recording an improvement based on May's figures. The continued health of the construction sector is critical to the government's plans to drive economic recovery through a range of residential and infrastructure projects.

Performance across the Construction sector

Around 46% of survey respondents reported a rise in housing construction with only 27% noting a reduction. This rebound reflects the mid-May easing of restrictions that had kept the property market in the deep freeze since the end of March. Civil engineering work and commercial projects also showed a return to growth although not quite as spectacularly as housing, while new business volumes finally returned to growth in June after a three month period of decline.

The government's newly announced drive to create a series of shovel ready infrastructure projects also played a part in boosting the June growth figures.
The business expectations index remains subdued but still rose to its highest levels since February, driven by the return to work onsite. Panel members are optimistic that business activity will rise with 46% expecting growth as opposed to 31% who forecast reduced activity based on the wider economic outlook for the UK.

Housebuilding has remained relatively strong throughout the crisis, with modest rises month on month since February.

Economic stars

According to Duncan Brock, group director of CIPS, builders are now the stars of the UK economy, helping to drive the fastest rise in purchasing activity for almost 5 years. Housing has led the way as building plans were finally unleashed after the government eased the lockdown in June.

Brock believes that this will lay the foundation for even stronger figures by the end of summer with companies buying up materials as business confidence improved for the first time since February.

And while supply chains have been creaking and inflation pushed to its highest level since January, building performance is already bouncing back from its worst results in the history of the PMI. One cautious note remains concerning the recovery of co-dependent sectors and deflated employment levels but the number of construction companies now open for business stands at 87.4%, up 5% on the previous figures.

The significant rise in the headline output number indicates that the sector is in surprisingly good health and continuing to build on its current momentum.

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