Civil engineering activity underpins growth in February

Modest rise in construction output but house-building activity expands at slowest pace for six months

UK construction companies recorded a sustained expansion of overall business activity in February 2017, with civil engineering replacing house building as the main growth driver, according to the seasonally adjusted Markit/CIPS UK Construction Purchasing Managers’ Index (PMI).

According to the Index, residential activity increased at the slowest pace for six months, while commercial building declined for the first time since October 2016.

At 52.5 in February, up slightly from 52.2 in January, Markit/CIPS UK Construction PMI registered above the neutral 50.0 threshold for the sixth consecutive month. However, the rate of output growth remained weaker than its post-referendum peak (54.2 in December 2016) and subdued in comparison to the trends seen over the past three-and-a-half years.

Survey respondents noted that the resilient economic backdrop and a stabilization in client confidence since the EU referendum continued to help drive construction growth in February. 

However, there were also reports that demand growth had softened so far in 2017. Reflecting this, incoming new work increased only marginally and at the slowest pace since last October. In addition, some construction companies noted that sharply rising input costs had had an adverse impact on decision-making and contributed to delays in contract completions.

Nevertheless, February data indicated that construction companies remain upbeat about their growth prospects for the next 12 months, with almost half (48%) forecasting a rise in business activity and only 13% expecting a decline.

The degree of positive sentiment was stronger than seen on average in the second half of 2016, but weaker than January’s 13-month peak. Strong demand for house-building projects was cited as a key factor likely to boost construction output.