Housebuilding boosts construction sector to best levels since 2007

A surge in housebuilding since the beginning of the year maintained construction activity in the first quarter at levels not seen since 2007, according to a survey of the construction sector.


The Markit purchasing managers’ index (PMI) recorded a rise in housebuilding activity to 64.2 in March, offsetting a slowdown in civil engineering to keep expansion in the sector at historic highs.

The survey of 170 construction firms found that overall activity remained steady at 62.5, marginally down from 62.6 in February and well ahead of the 50 mark that separates growth from contraction. The improving weather in March after February’s rain and floods also boosted housebuilding,

Rob Wood, chief UK economist at investment bank Berenberg, said the construction sector was now roaring ahead, supported by low interest rates, the government’s Help to Buy scheme and a general feelgood factor across the economy.

He said: “With the housing market booming and confidence in the economy returning, construction growth should remain strong through 2014. Housebuilding in particular is rising fast, driven by surging prices and government subsidies.”

Construction has been the slowest of the UK’s major industry sectors to recover from the crash and output remains more than 8% below where it stood in 2008. Wages for construction workers have also recovered at the slowest pace of any sector and remain more than 12% below their peak taking into account inflation, though wages rose 5.6% year on year in January.

The government’s Help to Buy scheme is credited with providing the sector with a much needed boost last year, and with the Bank of England’s funding for lending subsidy for lenders, has given builders the momentum to continue expansion through 2014.

The survey found that business expectations in March were at the highest level for more than seven years.

Howard Archer, chief UK economist at IHS Global Insight, said the sector was well placed for further robust expansion over the coming months.

“What is particularly encouraging and bodes well for the sustainability of the construction upturn is that the purchasing managers survey indicates that the strength in activity and orders are widespread across sectors.

“Housebuilding activity is leading the way and activity in March regained upward momentum after slowing in February from a more than 10-year high in January as activity was hindered by the very wet weather and flooding.

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