UK construction PMI rises at fastest rate since October 2015

(Sharecast News) - Output in the UK construction sector expanded in July at its steepest pace since October 2015 but more jobs were lost, according to data released on Thursday.

The Markit/CIPS construction purchasing managers' index rose to 58.1 from 55.3 in June, beating expectations for a reading of 57.0. The PMI came in above the 50.0 level that separates contraction from expansion for the second month in a row, with residential building the main driver of growth as activity rose to the greatest extent since September 2014.

Survey respondents pointed to pent-up demand and reduced anxiety among clients.

However, the survey also found that jobs were shed at a faster rate than in June, with around one in three respondents reporting a fall in employment. There were reports that some clients remained "apprehensive" about committing to new projects, resulting in intense competition to secure sales and squeezed margins.

Tim Moore, economics director at IHS Markit, said: "Construction companies took another stride along the path to recovery in July as a rebound in house building helped to deliver the strongest overall growth across the sector for nearly five years. Civil engineering and commercial activity are also back in expansion, which has been mainly due to the restart of work that had been delayed during the second quarter of 2020.

"Survey respondents noted a boost to sales from easing lockdown measures across the UK economy and reduced anxiety about starting new projects. However, new work was still relatively thin on the ground, especially outside of residential work, with order book growth much weaker than the rebound in construction output volumes."

Moore added that concerns about the pipeline of new work across the construction sector and pressure on margins "go a long way" towards explaining the fall in employment numbers.