April saw strongest growth in 2017 for British construction

April saw strongest growth in 2017 for British construction

Last month, the British construction industry experienced its fastest growth rate for this year so far, however doubts remain in the sector regarding the long-term.

IHS Markit reported that the purchasing managers’ index (PMI) for construction rose significantly in April, to a value of 53.2. This is an increase from 52.2 in March.

Builders remain bullish in the face of rising costs

One of the main drivers was an increase in orders beyond levels original expectations. However, the construction sector was still beaten by manufacturing values, which experienced a three-year high.

Max Jones, global corporates relationship director for construction at Lloyds Bank Commercial Banking, said:

“Some of the nervousness is coming from contractors with a focus on infrastructure, where the pipeline remains strong. The success of Crossrail has shown that mega-projects can be delivered on time and on budget but there are concerns about how government decision-making on infrastructure may be affected given the focus on Brexit negotiations.”

Whilst, simply put, any value higher than 50 accounts for an expansion, the long-term average reading of 54.5 has not been hit by the sector since early 2016.

Towards the beginning of 2017, the construction sector struggled, with the ONS reporting a growth of only 0.2% and therefore falling below the economy-wide measure of 0.3%.

UK Construction Sector: Rosy picture for 2017 from RICS

According to the ONS, the construction industry makes up 5.9% of Britain’s economic output. Growth in the sector is at the same time often seen as an indicator for wider growth across the country.

Paul Trigg, assistant head of risk underwriting at Euler Hermes, said:

“Despite recent robust performance across construction, we expect the sector to see anaemic growth in the short to mid-term as concerns about falling inward investment levels, thinning long-term order books and access to skills grow.”

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