CIPS survey

Jason Heath, Bibby Financial Services’ construction finance specialist looks at the latest Markit/CIPS survey and offers his opinion on the surprising increase in productivity.

Despite economists expecting the construction sector to decline in December, the latest Markit/CIPS survey of purchasing managers demonstrated an increase in productivity. And for the first time in nine months, all three categories of the industry showed an increase in activity.

The survey, which suggests a reading over 50 indicates growth, saw a rise in construction overall from 42.3 in November to 53.2 in December.Civil engineering, often seen as the most unstable category within the sector due to the generally large projects having a more associated risk to them, was surprisingly the fastest growing category within the sector.

The unexpected increase is perhaps down to investment in infrastructure being a major focus area for the Government outlined within the National Infrastructure Plan 2011. it would therefore suggest some of the investment has started to filter into projects to give a kick start in December.

While mortgage lending has been somewhat volatile, residential construction recorded its second monthly reading in positive territory. Albeit modestly, commercial construction also demonstrated growth.

From experience, December tends to be lower in productivity which can sometimes be due to harsher weather conditions. However, the increase in activity could be down to the milder weather conditions experienced this winter, undoubtedly enabling workers to get onto site – something that was a major problem for construction firms in December 2010.

With austerity measures starting to kick in and Olympic contracts coming to an end it is encouraging to see an increase in productivity at the end of a difficult year. However, 2012 still presents economic challenges for the UK and in particular construction firms where contracts are limited due to public sector cuts. On top of this they are faced with challenges accessing finance as construction continues to be seen as a high risk sector. For this reason it is more important than ever that construction firms continue to invest in their business and are aware of all the funding solutions available to them.

Posted in Bibby Financial Services updates by Julia Legge on 17 January 2012.

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