Construction industry closes year on optimistic note

Markit, Glenigan

There was an optimistic close to 2016 with two major organisations reporting positive news for the construction industry. The Markit/CIPS UK Construction PMI (purchasing managers’ index) showed growth in new orders hitting an 11-month high in December. And the Glenigan Index reports starts in the final three months of the year being 2% higher than a year earlier.

Markit reported a seasonally adjusted index of 54.2 for December, up from 52.8 in November. The headline index has been above the 50.0 no-change mark for four consecutive months, and the latest reading signalled the fastest pace of expansion since March 2016. Anecdotal evidence suggested that improving order books and a general rebound in business conditions helped to lift construction output in December.

The latest Glenigan Index reports the value of starts on site in the final three months of 2016 being 2% higher than a year earlier. Non-residential project starts were 5% ahead of the same period in 2015, lifted by a sharp rise in hotel and leisure projects, while office and industrial project starts were unchanged on a year earlier.

Residential starts were 5% up on a year earlier, although lower than the preceding three months.

Civil engineering remains a drag on underlying project starts, being 19% down on a year ago.

Allan Wilén, Glenigan’s economics director commented, ‘Overall project starts were 2% lower during 2016 as a whole. However, the latest Glenigan Index data indicate a steadying in market conditions and investor confidence.

‘The stabilisation in industrial and office project starts is especially encouraging. Earlier in the year, both sectors saw project starts fall sharply as investors reviewed the implications of the Brexit vote for their projects’ viability.’

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