It is summer. July
has started with some of the hottest temperatures we have seen for years and we
are promised more to come. Henley,
Wimbledon and The Ashes all provide welcome and colourful distractions. Cold Pimms or warm beer, strawberries or
barbeques, park or beach, whatever your taste, relax and enjoy.
Those of us involved in construction ought to be optimistic
(well maybe not in the case of the cricket).
In the early part of the year, economic activity in the construction
sector was falling back. That was no doubt in part due to the inevitable
slowdown that preceded the general election.
Over the last quarter, however, economic activity in construction has
bounced back. June saw the fastest
acceleration in four months. With the
election out of the way, and a relatively decisive result, some confidence has
returned. Job creation in the sector was also sharply on the rise.
Markit, who compile the Puchasing Managers Index, said that
respondents to its latest survey were feeling buoyant about the outlook for the
economy. ‘Anecdotal evidence’ it said
‘linked greater new business volumes to rising client confidence and improving
business conditions’.
Commercial and civil engineering operations are contributors
but, once again, housebuilding is leading the charge. Persimmon, one of the country’s largest
housebuilders, saw output rise 7% in the first half of the year. Total revenues
were up 12% at £1.34bn.
Despite the sunny outlook, there are a few clouds on the horizon.
Nationwide has reported an unexpected fall in house prices of 0.2% in
June. That equates to an annual rate of
growth at a two year low of 3.3% compared to 4.6% in May.
Labour and supply shortages, skills gaps and sub-contractor
availability remain persistent threats. Input prices continue to rise. So whilst an increased level of activity is
to be welcomed, pressure on margins looks set to remain for some time yet.
Enjoy the sunshine whilst it lasts.
Bill is a consultant in the Construction team at Cripps. To find out more about Bill please click here
