A surge in house building helped boost the UK's construction output in May.

The latest Markit/CIPS UK Construction Purchasing Managers' (PMI) Index posted 56.0 in May, up sharply from 53.1 in April.

The rebound in business activity saw output hit a 17-month high with residential activity replacing civil engineering as the best performing category.

The housing sub-category has rebounded strongly following the seven-month low seen in March. In addition, the latest increase in residential building was the fastest since December 2015. Survey respondents cited a strong pipeline of new development projects and resilient underlying demand conditions.

In addition, solid rises were seen in civil engineering and commercial building. However while commercial development remained the weakest performing sub-category, the sector's rise is the fastest since March 2016.

New business intakes picked up in May, with the rate of expansion the fastest seen so far in 2017. Survey respondents stated there was resilient demand from the housing sector. However, despite the improvement in new work, construction firms noted that heightened economic uncertainty continued to act as a brake on client spending.


Increased workloads underpinned a further marked rise in employment numbers across the construction sector in May and the rate of job creation accelerated for the second month running to its strongest since January 2016.

Latest data showed that input buying expanded at the steepest pace for 16 months in May, while a rebound in demand for construction materials placed pressure on supply chains in May. Delivery times lengthened to the greatest extent since March 2015, however there were positive developments in terms of cost inflation, as overall input prices rose at the slowest pace for seven months.

Firms reported the weak exchange rate had led to intense negotiations with suppliers, but some noted that the peak phase of price hikes for imported materials had now passed.

Duncan Brock, Director of Customer Relationships at the Chartered Institute of Procurement & Supply, said: "After years of sluggish house building, the construction sector has snapped back into action in May. Construction growth has surged to a 17-month high as the uncertainty caused by the EU referendum appears to be abating.

"The unexpected recovery in construction has been felt most acutely in residential housing as builders finally feel able to respond to demand for new homes. The sector had been held back by the rising cost of raw materials but after months of tense negotiations with suppliers, input prices are starting to stabilise.

"The rapid upturn in production is putting considerable pressure on construction supply chains. Suppliers are struggling to meet demand while there is a growing shortage of contractors to complete work.

"After the experience of the financial crisis, it may be some time before risk aversion fully recedes and suppliers have more confidence to invest in their capacity. Only time will tell whether we are witnessing a long awaited resurgence in housebuilding."

(LM)