Construction surges despite ‘intense pressures’

The GB construction sector remains hugely important to the local industry
The GB construction sector remains hugely important to the local industry

Construction output rose at its fastest pace for nine months in December, but firms are still grappling with “intense cost pressures” caused by the Brexit-hit pound.

The closely watched Markit/CIPS UK Construction purchasing managers’ index (PMI) rose to 54.2 last month, up from 52.8 in November and above economists’ expectations of 52.6.

A reading above 50 indicates growth with the better-than-expected performance driven by improved order books and a rebound in business conditions, with new order growth hitting an 11-month high.

However, input cost inflation jumped to its highest level since April 2011, as rising imported raw material prices - driven by sterling’s Brexit slump - were passed down from suppliers.

It comes after separate PMI figures on Tuesday showed manufacturing output leap to a two-and-a-half-year high in December thanks to an exports boost from the plunging pound.

Tim Moore, senior economist at IHS Markit, said the data showed the construction industry delivered a “solid rebound” in the final quarter of last year.

“All three main areas of construction activity have started to recover from last summer’s soft patch, but in each case growth remains much weaker than the cyclical peaks seen in 2014.

“Housebuilding remains a key engine of growth for the construction sector, with the latest upturn the fastest for almost one year.

“Meanwhile, commercial activity was the weakest performing category in December, reflecting an ongoing drag from subdued investment spending and heightened economic uncertainty.”

The report said housebuilding was the best performing area of the industry, with housing activity delivering its fastest expansion since January.