British Construction Activity Bounces Strongly

on Jul 6, 2020
Updated: Dec 19, 2022

The UK construction sector turned around sharply in April, with the total activity index jumping back above the fifty level. As the UK is gradually reopening, the construction sector sees the fastest rise in almost two years. 

The index jumped to 55.3 in June from 28.9 in May, showing a remarkable increase in total construction output. It is the steepest pace of expansion since July 2018.

UK Construction Sector During the Coronavirus Pandemic

Details of the report revealed an interesting picture for one of the most dynamic construction sectors in Europe. The strong rebound in construction activity provides hope for other sectors to perform the same, as businesses reopen.

Despite the positive headline and the fact that new orders rose in June, employment fell again during the month. Also, new business volumes increased only marginally in June, albeit ending a three-month period of decline.

Residential buildings were the stars of this report. The expansion seen in the residential construction sector is the strongest in almost five years, with respondents of the survey showing optimism for the period ahead. Commercial work and civil engineering activity also expanded in June, contributing to the overall positive report.

The construction sector is one of the most important sectors in this economy – it employs a lot of people directly and indirectly. Most developed economies attribute special attention to the housing and construction sector, with reports of the sector being closely monitored. In the United States, for example, the economic calendar is full of data pointing to the evolution of the housing and construction sector.

The United Kingdom has a dedicated PMI for the sector, one of the few countries to calculate a PMI for construction. It shows the importance in the overall GDP, and it is monitored separately from the services and manufacturing sectors.

Price inputs rose too, as a side effect of the pickup in the construction activity. The lack of materials availability pushed up input costs, with effects in the upcoming inflation data. Overall, it is a good report, showing a sector that rebounded sharply in June. Construction companies are confident, and cautious optimism dominates the industry.

The only negative so far, and a reminder of the overall fragility we live in, is shown in the employment component. The ongoing reductions in staffing numbers point to a long way until a full economic recovery is in place.