A surge in new home construction during the first quarter of the year has resulted in a construction growth rate not seen since 2007, a new construction sector survey reveals.
The Markit Purchasing Manager’s Index, or PMI, rose to 64.2 in the month of March, helping the construction sector reach historic highs, despite a significant slowdown in civil engineering activity.
The survey, which polled 170 UK construction firms, discovered that overall construction activity remained consistent at 62.5, down a marginal amount from February’s 62.6 level and well ahead of the all-important 50 mark, which is the line of demarcation between growth and contraction.
After the occurrence of rampant rains and flooding throughout February, March’s improved weather also served to boost new home construction.
According to Rob Wood, UK economist for the Berenberg investment bank, the construction sector is now roaring full-steam ahead, aided by the Help to Buy Scheme, low interest rates, and a general uptick in the economy.
“With the housing market booming and confidence in the economy returning, construction growth should remain strong through 2018. Housebuilding in particular is rising fast, driven by surging prices and government subsidies,” said Wood.
Nevertheless, construction has been the slowest of all of the UK’s major sectors to recover from the market meltdown and output still remains nearly 9 percent below 2008 levels. Of all the sectors, wages in the construction sector have also been the slowest to recover, remaining nearly 13 percent below their peak levels, accounting for inflation. However, wages for construction workers rose year-over-year by 5.6 percent in January.
Many have credited the government’s Help to Buy Scheme with giving the construction sector the boost it needed to rebound from last year’s stagnant growth rates. The Funding for Lending subsidy provided to lenders from the Bank of England has also given builders the momentum they need to continue expanding throughout 2018.
The survey also found expectations for construction firms in March were at their highest level in over seven years.
According to Howard Archer of IHS Global Insight, the construction sector is well-positioned for continued robust expansion throughout 2018.
“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,” he said.
Archer continued, “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.”