Commercial Activity Drives Up UK’s December Construction Output

According to data from the Markit/CIPS Construction PMI, the UK’s most rapid growth in commercial activity for over 14 months has led to a rebound in December construction activity.

The index, responsible for measuring construction activity, stood at 57.8 in December. This is a considerable increase from November’s seven-month low of 55.3. It is also far from the 50.0 ‘no change’ level. This is great news.

While housing output rebounded significantly from November’s 29-month low, the commercial activity in December experienced its most rapid growth since October 2014. Survey respondents felt this was mainly driven by new invitations to tender and the housing sector’s growth in the flow of development opportunities.

Compared with the previous month however, we have seen a marginal drop in civil engineering activity. This marks the end of seven consecutive months of growth in the sector.

On a more positive note, December’s growth in new work across all sectors during December was the second-fastest since July 2015. Job creation also increased after seeing a decline to its lowest point for more than 30 months in November. Again, great news.

Interestingly, the survey actually highlighted a relatively negative outlook, with just 51% of the companies surveyed expecting a rise in business activity during 2016.

Offering his thoughts on the data, Max Jones, Lloyds Bank Commercial Banking global corporates director for construction said: “Commercial construction is beset by uncertainty in the regions and price pressures in London and the South-east, yet housebuilding remains boosted by government measures to increase demand.

“Feedback from clients suggests many are relatively sanguine about external headwinds. Many large contractors have little in the way of exposure outside the UK and therefore feel the potential of a ‘Brexit’ would not impact them either way.

“Larger firms will also be less affected than most by the introduction of the living wage, and an interest rate rise is likely to be accommodated fairly comfortably by a sector which is generally well-hedged and has comparatively low levels of debt on balance sheets.”

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