UK construction ends 2016 on a high

UK construction ends 2016 on a high

British construction companies signalled a positive end to the year, led by the fastest rise in new order volumes since January 2016.

Stronger demand patterns resulted in sustained job creation and a broad-based upturn in business activity during December, according to the latest research by IHS Markit and CIPS.

However, the construction sector continued to experience intense cost pressures as suppliers passed on higher imported raw material prices. The latest rise in overall input costs was the steepest for just over five-and-a-half years.

At 54.2 in December, up from 52.8 in November, the seasonally adjusted Markit/CIPS UK Construction Purchasing Managers’ Index (PMI) signalled a robust and accelerated expansion of overall construction output.

David Noble, group chief executive officer at the Chartered Institute of Procurement & Supply, said: “The residential sector raced ahead this month, with the fastest pace of growth since January 2016.

"Strong pipelines of new work were reported across all sub-sectors, and construction firms showed improved confidence after the impacts of uncertainty around the EU referendum.

“Prices continued on their upward inflationary trajectory, at the strongest rate for five and a half years.

"In response, firms have increased their stock buying to not only fulfil new orders, but also to counteract anticipated price increases throughout the year, as inflationary pressures are set to continue and the weakness of the pound persists.

"Stock levels at suppliers were also under pressure, as vendor performance deteriorated to the greatest extent since June 2015.

“With these more resilient economic conditions, the sector also reported the fastest pace of job creation since May 2016, as companies developed their workforces to meet new projects.

“In the short-term at least, the sector looks set to enjoy these improved demand conditions for the coming months, which is positive news after many months of instability.”