UK construction shows signs of revival as uncertainty recedes

Britain's construction industry showed signs of improvement in January as demand picked up and optimism increased, a survey showed.

The IHS Markit/CIPS construction activity index rose to 48.4 in January from 44.4 the month before. The figure showed activity falling but at the slowest pace for eight months and significantly better than sharp drops at the end of 2019.

Survey respondents reported increased client demand after the Conservatives' resounding general election victory in December. As a result, construction companies are more positive about growth prospects than at any time since April 2018.

Housebuilding was the best performing part of the sector, registering the smallest dip in output since May 2019. Commercial activity fell for the 13th month running but was a big improvement on December and the slowest pace of decline since early 2019.

Tim Moore, economics associate director at survey compiler IHS Markit, said: "The construction sector downturn lost intensity in January amid slower reductions in house building, commercial work and civil engineering activity.

"The latest dip in construction output was much shallower than in December, with survey respondents often commenting on improved willingness to spend among clients since the general election."

Civil engineering was the worst-performing part of the market amid a lack of new tender opportunities to fill gaps left by completed infrastructure projects. Overall, respondents said reduced political uncertainty had the potential to unlock projects and stimulate client spending but with tough trade talks about to begin with the EU the economy and business confidence could face further pressures.

Duncan Brock, group director at the Chartered Institute of Procurement and Supply, said: "Though this rebound is a welcome sign, as with all sudden improvements, the danger remains the sector could easily recoil and shrink again. The domestic political situation and the UK’s attempt to find its place in the world remains littered with obstacles so businesses could find themselves on this see-saw of good and bad news for some time yet."