UK construction companies made a positive end to the year with 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, with the Markit/CIPS UK Construction Purchasing Managers’ Index (PMI) rising to 54.2 in December, up from 52.8 in November.

According to Markit/CIPS, residential building activity remained the best performing sub-category at the end of 2016. Work on civil engineering projects also picked up at a robust pace and commercial construction increased but only marginally.

However, cost pressures continued 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.

Reports from survey respondents cited rising client demand and a resilient economic backdrop although December data also indicated that exchange rate depreciation continued to drive up input prices across the UK construction sector.

David Noble, Group Chief Executive Officer at the Chartered Institute of Procurement & Supply, said: “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.”

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