Demand to “Rocket” if Confidence Holds

Construction firms’ ability to recruit enough skilled staff is the only thing holding back the industry, KPMG has said in response to the latest Markit construction PMI figures.
The latest survey of construction purchasing managers showed construction output expanded in August at its fastest pace since September 2007.
KPMG UK head of infrastructure, building and construction Richard Threlfall said the results were further evidence that sentiment across the construction industry had shifted, and that the positive outlook was helping drive construction output.
“It is particularly encouraging to see the improvement not only in the residential sector but in the commercial and civils sub-sectors as well,” he said.
“The only thing that is holding the industry back now is not a lack of demand, but the ability of businesses to recruit sufficient experienced staff.
“While there’s been a lot of scepticism as to how quickly the market would recover, history suggests that once the mood changes, construction demand will rocket.
“Time to hold on to your hard hats.”
Markit’s August reading of 59.1 was up from 57.0 in July and above the ‘no change’ level of 50 for the fourth consecutive month.
Chartered Institute of Purchasing & Supply CEO David Noble said: “A new dawn is breaking in construction.
“The industry recorded the fastest pace of growth since 2007 in August, leaving the dark days of recession behind.”
Respondents said that the amount of public infrastructure work had grown in addition to the widely reported rise in housing demand.
The amount of new work also grew at its fastest rate since March 2012 and construction employment rose for the third month in a row.
The majority of construction firms were confident about the year ahead, with 46 per cent expecting a rise in work and 10 per cent a reduction.
They said their confidence derived from improvements to the wider economy, which had made their clients more willing to spend.
The results echo those of the Construction News Barometer survey of the views of top contractors’ chief executives, chairman and directors, which found that the industry’s leaders are hopeful turnover will return to pre-recession levels by 2015.
However, they were worried that a shortage of skilled staff and rising costs could temper the recovery.
Mr Noble said: “Builders have seen a step change in recent months and are now starting to show their true potential to the UK economy.
“Nowhere is this more true than in new business, where growth is at its second-strongest rate in almost six years, leading to more jobs and increasing confidence.
“Robust expansion can be seen in all three sub-sectors: housebuilding is rising at a rate not seen since mid-2010, commercial growth is also strong, but it is the strongest growth in six years recorded in civil engineering that is a real cause for optimism and a sure sign the sector has overcome its previous difficulties.
“This new direction brings new challenges, not least the prospect of additional work and insufficient capacity to meet demand. How the sector navigates these tensions and manages the supply chain could come to define its performance over the coming months.”
Delivery times for materials lengthened by the highest amount since June 2007, reflecting the strongest level of purchasing since March 2012.
Markit senior economist Tim Moore said: “The latest construction purchasing managers index figures are yet another indication that the UK economy has performed impressively over the summer months.
“A steep upturn in civil engineering activity suggested that public sector demand has joined residential building as a key driver of construction output growth during August.
“With overall output levels now rising at the fastest pace for around six years, it seems highly likely that the construction sector will provide another positive contribution to UK GDP in the third quarter of 2013.
“New public sector infrastructure spending looks to have started making an impact on the ground, and this was a contributory factor behind the sustained construction sector job creation seen in August.”
Michael Conroy Harris, construction lawyer at law firm Eversheds, said: “After encouraging signs last month, the latest figures should continue to inject some much-needed confidence into the industry.
“While optimism around housing is rightly cautious as there is the risk that we might be looking at a bubble, it’s heartening to see an upturn in another sector and the increase in civil engineering activity suggests some strength and depth to the recovery.”