Index hints at 'new dawn' for construction in the UK

Britain’s housebuilding bounce-back helped cement the biggest rise in construction output for more than a year last month in the latest sign of a “new dawn” for the sector.

Index hints at 'new dawn' for construction in the UK

Britain’s housebuilding bounce-back helped cement the biggest rise in construction output for more than a year last month in the latest sign of a “new dawn” for the sector.

The closely-watched Markit/CIPS construction purchasing managers’ index (PMI) showed a reading of 51 in June – above the 50 level which separates growth from contraction and the highest level since May 2012.

Construction activity has now risen for two months in a row for the first time in more than a year, driven by a hike in residential housebuilding thanks to Government initiatives such as Help to Buy.

Residential housebuilding activity has increased for five consecutive months, although the rate of expansion eased from the more than two-year high seen in May.

CIPS chief executive David Noble said: “A new dawn is emerging in the construction industry, with confidence of a sustained recovery beginning to build thanks to two months of consecutive output growth and the pace of new orders expansion hitting a 13-month high.

“Housing is the leading light sustaining last month’s performance, meanwhile commercial and civil engineering activity stabilised, arresting months of decline giving further cause for optimism.”

The construction figures follow PMI data yesterday revealing the steepest surge in manufacturing activity for more than two years in June, raising hopes that economic growth has increased further in the second quarter.

Kelvin Davidson, property economist at consultancy Capital Economics, said: “This was the first time that the construction PMI had been at 50 or above for two months in a row since May last year and, as such, adds to other evidence of a pick-up in the wider economy.”

The British Chambers of Commerce (BCC) increased its forecast for second-quarter growth to 0.6%, which would be double the 0.3% seen in the first quarter, after its quarterly economic survey showed impressive export sales.

Exports from the dominant services sector rose to a balance of 36%, the highest level since the BCC survey started in 1989, while export sales from manufacturing firms rose to a balance of 23%, the best level for a year.

The Government’s Help to Buy scheme launched in April has been spurring on a rebound in construction following a painful slump that has dragged on the wider economy.

Housebuilders have been reporting surging interest due to the new Help to Buy package of loans and guarantees, with Charles Church parent Persimmon the latest to report back from the sector today, saying reservations of new homes have surged 30% since the launch of Help to Buy.

The programme allows people to buy properties with only a 5% deposit, lending up to 20% of the value of a newly built home, interest-free for five years.

A second phase of the scheme will launch in January guaranteeing mortgages on new and existing residential properties worth up to £600,000.

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