UK construction shows surprise acceleration in September
Britain’s construction industry unexpectedly picked up speed in September, helped by a post-lockdown bounce in the housing market, a survey showed on Tuesday.
The IHS Markit/CIPS UK Construction Purchasing Managers’ Index (PMI) accelerated to 56.8 from 54.6 in August, above all forecasts by economists who had pointed to a slight slowing.
“Following August’s slowdown, growth in UK construction activity rebounded strongly in September,” Eliot Kerr, an economist at IHS Markit, said.
“Forward-looking indicators point to a sustained rise in activity, with new work increasing at the quickest pace since before the lockdown and sentiment towards the 12-month outlook at its strongest for seven months.”
Construction firms continued to cut jobs, although at a significantly slower rate than in August.
Increases in activity in home-building – which reported the fourth sharp monthly increase in a row – and in commercial construction more than offset a fall in civil engineering work.
UK Housing Market sees Strong Recovery
Britain’s housing market has boomed since coronavirus restrictions were lifted in May, driven by a tax cut, pent-up demand from earlier in the year, and demand for more spacious homes after the lockdown.
Some industry officials have warned that the housing market recovery is likely to run out of steam with unemployment expected to rise as the government pares back its job support programmes.
The all-sector PMI – a combination of the construction, services, and manufacturing surveys – fell back to 56.6 from August’s six-year high of 58.7, reflecting slower growth in Britain’s dominant services industry.
Britain’s economy shrank by a record 20% in the second quarter when lockdown measures were tightest and performed worse than any other major advanced economy in the first half of the year.
However, there has been a fairly rapid – though uneven – recovery, and economists polled by Reuters forecast on average that August gross domestic product data, due at the end of this week, will show output was around 7% below its year-ago level.
Last week the Bank of England’s chief economist, Andy Haldane, said he expected output in September to be just 3-4% below year-ago levels, and said many commentators had underestimated the strength of the rebound.
Job Losses continue across all Sectors
Businesses also cut jobs for the seventh month in a row in September – the longest run since 2010. The reductions, though, were at the slowest pace since March despite the imminent end of a government job support programme this month.
The government has been using measures to protect jobs. Under the furlough scheme, it has been paying most of the wages for workers when their employers cannot. That has prevented many of those people becoming unemployed.
But the furlough scheme is being wound down. Employers are being asked to pay a bigger proportion of the costs of their employees and the scheme will close at the end of October.
This is one reason why unemployment has begun to rise, as many businesses will decide they cannot afford to start paying those workers again and need to let them go.
Recent figures showed 300,000 redundancies were planned in June and July alone, as employers prepared to cut staff.
Accumulate Maintains Position of Strength within Construction Sector
When the coronavirus crisis hit the UK back in March this year, Accumulate was quick to respond by taking measures to protect staff with new working practices in line with the government’s regulations. We have now ensured everyone working on our sites is regularly tested for COVID-19 so that we can continue to meet our development milestones.
We are confident that the pandemic has not prevented us from powering ahead with our strategy and with economic indicators showing a flourishing construction sector, our projects continue to represent excellent value to our investors.