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U.K. Construction Expands at Fastest Pace Since September 2007

June 8th, 2010

An index of U.K. construction expanded in May at the fastest pace since September 2007, led by gains in homebuilding.

A gauge of building activity, based on a survey of purchasing managers, increased to 58.5 from 58.2 in April, Markit Economics and the Chartered Institute of Purchasing and Supply said today in an e-mailed statement. Results over 50 indicate expansion.

The U.K. economy expanded 0.3 percent in the first quarter, more than initially estimated, after upward revisions to manufacturing and construction. Bank of England policy makers unanimously held their bond plan at 200 billion pounds ($294 billion) last month as they assessed risks to the recovery from the crisis in the euro area and government measures to tame the record budget deficit.

“Recovery in construction is creating a ripple effect across the economy as firms supplying the industry benefit from increased purchasing activity,” David Noble, chief executive at CIPS, said in an e-mailed statement. “However, the recovery is so fragile that it will be extremely vulnerable to the impending public-sector cuts and it is unclear whether the recovery is robust enough to cope with such knock backs.”

A measure of homebuilding rose to 60.5 from 60.3 the previous month, the biggest increase since August 2007. A measure of new orders for all construction grew at the fastest pace since October 2007, and a gauge of employment rose to 50.8, the first expansion in two years.

Barratt Developments Plc, the U.K.’s biggest homebuilder by volume, said May 12 it’s “on track” to deliver a profit in the six months through June after selling more expensive properties. Chief Executive Officer Mark Clare said that “while the market has seen a measure of recovery, we remain cautious given continuing economic uncertainty and constrained lending.”

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