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UK construction booms as Brexit turmoil eases, housebuilders rally
3rd Mar 2020 10:58
(Sharecast News) - The British construction sector rallied last month, as Brexit-related political and economic uncertainty eased and new orders surged, a widely-watched survey published on Tuesday showed.
The IHS Markit/CIPS UK Construction Total Activity Index was 52.6 in February, up from 48.4 in January and easily beating the consensus for around 49.0. It was also the first time since April 2019 that the index had come in ahead of the neutral 50.0 mark. A reading above 50.0 is regarded as growth, while below 50.0 is deemed a contraction.
The overall rate of construction output growth was the fastest for 14 months, while new orders increased at the sharpest pace since December 2015.
Underpinning the rebound was an increase in housing and commercial work, with the housing activity index surging to 54.3 from 48.8 a month earlier.
Duncan Brock, group director at the Chartered Institute of Procurement & Supply, said: "After a sustained period of contraction in construction last year, the resurgence in levels of new work was a surprising but much needed development for a sector that was on its knees. As of the blocks of December's election and Brexit uncertainty were largely removed, it was the residential sector that was the main winner, with the fastest escalation in housebuilding since July 2018."
Tim Moore, economics director at IHS Markit, said: "Some construction firms suggested that the recovery in output would have been even stronger had there not been disruptions on site from severe weather conditions during February.
"Civil engineering activity moved another step closer to stabilisation. A number of survey respondents commented that contract awards from HS2 and other major transport projects had the potential to boost infrastructure work in the year ahead."
But he also sounded a note of caution: "The fly in the ointment is the uncertain impact of the coronavirus outbreak on UK economic growth prospects. A renewed slowdown could see domestic investment spending put back on hold and dampen the outlook for the UK construction sector."
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: "The election has given housebuilding a new lease of life. The pick-up in the construction PMI to its highest level since December 2018 marks another milestone in the economy's post-election recovery.
"Further ahead, we remain concerned that the hard Brexit envisaged by the government will damage goods and services exports, thereby reducing occupancy of existing industrial and office space, and lead to lower levels of immigration, hitting demand for new homes. But for now, construction has the wind in its sails."
Housebuilders were some of the biggest gainers on the London Stock Exchange in the morning session, with Persimmon up 6% at 3,010.0p, Taylor Wimpey ahead 5% at 213.68p and Berkeley Group trading 4% higher at 4,908.0p by 1100 GMT.
The IHS Markit/CIPS UK Construction Total Activity Index was 52.6 in February, up from 48.4 in January and easily beating the consensus for around 49.0. It was also the first time since April 2019 that the index had come in ahead of the neutral 50.0 mark. A reading above 50.0 is regarded as growth, while below 50.0 is deemed a contraction.
The overall rate of construction output growth was the fastest for 14 months, while new orders increased at the sharpest pace since December 2015.
Underpinning the rebound was an increase in housing and commercial work, with the housing activity index surging to 54.3 from 48.8 a month earlier.
Duncan Brock, group director at the Chartered Institute of Procurement & Supply, said: "After a sustained period of contraction in construction last year, the resurgence in levels of new work was a surprising but much needed development for a sector that was on its knees. As of the blocks of December's election and Brexit uncertainty were largely removed, it was the residential sector that was the main winner, with the fastest escalation in housebuilding since July 2018."
Tim Moore, economics director at IHS Markit, said: "Some construction firms suggested that the recovery in output would have been even stronger had there not been disruptions on site from severe weather conditions during February.
"Civil engineering activity moved another step closer to stabilisation. A number of survey respondents commented that contract awards from HS2 and other major transport projects had the potential to boost infrastructure work in the year ahead."
But he also sounded a note of caution: "The fly in the ointment is the uncertain impact of the coronavirus outbreak on UK economic growth prospects. A renewed slowdown could see domestic investment spending put back on hold and dampen the outlook for the UK construction sector."
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: "The election has given housebuilding a new lease of life. The pick-up in the construction PMI to its highest level since December 2018 marks another milestone in the economy's post-election recovery.
"Further ahead, we remain concerned that the hard Brexit envisaged by the government will damage goods and services exports, thereby reducing occupancy of existing industrial and office space, and lead to lower levels of immigration, hitting demand for new homes. But for now, construction has the wind in its sails."
Housebuilders were some of the biggest gainers on the London Stock Exchange in the morning session, with Persimmon up 6% at 3,010.0p, Taylor Wimpey ahead 5% at 213.68p and Berkeley Group trading 4% higher at 4,908.0p by 1100 GMT.