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Britain’s nascent economic recovery has lifted construction output for the first time in seven months, according to the latest survey of industry purchasing managers.
Respondents to the purchasing managers' index for the construction sector, a survey compiled by data company Markit, said the expansion was driven by the fastest increase in housebuilding activity in 26 months.
The results are the latest sign the economy is gathering momentum after several years of stagnation. Although the construction sector only accounts for about 7 per cent of the UK economy, it has suffered badly since the recession and held back growth.
David Noble, chief executive of the Chartered Institute of Purchasing and Supply, said the government’s attempts to boost housebuilding – the latest of which involves equity loans for people buying new homes – had given “months of lacklustre growth a shot in the arm”.
Critics, including the International Monetary Fund, have been sceptical about the government’s assertion its Help to Buy scheme would boost the supply of housing, warning it was more likely to lift demand and inflate house prices.
Mr Noble’s optimistic view was backed up by data from Glenigan, a construction consultancy, which said the value of new private housing projects was 15.2 per cent higher in the three months to May than in the same period a year earlier.
Glenigan collects information from planning departments across the UK to provide an early indication of construction activity.
In spite of the positive signs on housebuilding, the PMI survey showed commercial building and civil engineering activity continued to contract, albeit more slowly than in recent months.
“Much of the recent increase in activity seems to rely on just one sub-sector – residential construction – which leaves the index prone to further volatility should the recent housing . . . improvement fizzle out,” said Blerina Uruçi, an economist at Barclays.
Noble Francis, an economist at the Construction Products Association, said that commercial building projects were more important than housebuilding for the sector’s health. The two activities account for 22 per cent and 17 per cent of total construction output respectively.
Because of these weightings, the CPA forecasts a 2 per cent fall in construction output this year, in spite of an expected 8 per cent increase in housing starts.
The coalition government has said it plans to spend an extra £15bn on infrastructure projects to boost the construction sector and the wider economy, but only after 2015.
Additional reporting by Gill Plimmer