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Housebuilding Growth as Brexit Gloom Recedes

Last month’s rebound in the construction sector was propelled by a sharp increase in housebuilding.

Overall, industry activity rose at the quickest pace in close to a year and a half.

The survey results suggested that the sector was displaying a strong recovery from a relatively slow start at the beginning of 2017. Economists said that the sobering influence of the EU referendum appeared to be receding.

The purchasing managers’ construction index, one of the leading indicators of industry well being, reported business activity jumping to 56, which suggests the strongest growth since December 2015.

A sharp and sustained increase in housebuilding development drove the advance, which represented a bounce back from last March’s seven-month low. Developers attributed the rise in housebuilding to both strong underlying conditions and a strengthened pipeline of new development projects.

Chartered Institute of Procurement & Supply director Duncan Brock said that after years of slow housebuilding activity, the construction sector snapped back to life last month.

He stated that construction industry growth has reached its greatest height in 17 months as Brexit uncertainty appears to be receding. The unexpected recovery has manifested itself most acutely in residential housing, as builders finally feel ready to meet the demand for new homes.

 

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Another area that continued to flourish was civil engineering. The weakest part of the sector was commercial development.

The bigger housebuilding workload resulted in an equally strong increase in new jobs, while growing demand for construction materials applied added pressure to supply chains. Delivery times extended to their greatest length since March 2015.

However, raw materials cost inflation appears to have surpassed its peak after rising significantly in recent months due to the lower performance of the pound, which subsequently  raised import costs. Survey respondents also stated that the lower exchange rate led to energetic negotiations with suppliers.

Mike Chappell, Lloyds Bank Commercial Banking managing director for construction, said that while universal focus is on the general election that is on the horizon, the UK construction sector is carrying on with the job at hand, a conclusion supported by the survey. There is also anecdotal evidence that last year’s EU referendum has had little effect on trading activities.

The strong growth in construction activity was much better than analysts had been anticipating and comes after an equally encouraging PMI survey, which suggested that the sector was in increasingly better health.

 

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