February 27, 2017

Housing props up construction industry growth

News Article

Overall business activity amongst UK construction companies is up thanks to an increase in housing development.

The latest figures released by Markit/CIPS, which track activity for the ‘Construction Purchasing Managers’ Index, reveal that, after seasonal adjustments, it stands at 52, staying above the key ’50.0 no change threshold’ for the second consecutive month.

Although recovery is modest, it is the seen as a sign that the construction industry is going in the right direction, with new order volumes increasing across all sectors.

Housing remains the most significant reason for the upturn in figures and the report points to the pace of expansion being only slightly less than last September which recorded an eight-month high.

Construction businesses have also reported taking on new staff and increasing their purchasing activity.

The months ahead look cautiously optimistic with 43 per cent of construction firms predicting that business activity will increase during the next 12 months, compared with 14 per cent who believe they will see a downturn.

Tim Moore, senior economist at IHS Markit and author of the Markit/CIPS Construction PMI, said: “The UK construction sector has started the fourth quarter in a positive fashion, with the latest survey data revealing a moderate rebound from the downturn seen during the summer.

“Construction growth was dependent on a solid recovery in residential work, as civil engineering and commercial building struggled for momentum in October.

“While business activity has picked up since the third quarter, the recent phase of new order growth has been the weakest for three-and-a-half years.

"Survey respondents noted that Brexit-related uncertainty and concerns about the UK economic outlook had held back investment spending."

Adam Davis, a Partner who specialises in construction and engineering law, said: “The latest industry figures appear to show business activity is heading in the right direction.

“The Markit report suggests there are opportunities out there for the sector to take full advantage of. Companies wishing to fully embrace these new business prospects should ensure that any contracts put in place are fully compliant and not likely to disadvantage their business further down the line. Seeking professional advice can often avoid misinterpretations which might otherwise lead to Joint Contract Tribunal (JCT) disputes.”

For more information about Palmers services to the construction and engineering sector, including contracts and advice on JCTs, please contact us.