New figures have revealed how strong housebuilding demand and a rise in new orders led to an expansion of activity for UK construction buyers in July.

The latest IHS Markit/CIPS UK Construction Purchasing Managers' Index® (PMI) posted 55.8 in July, a sharp rise compared with 53.1 in June.

For the period, house building was the best performing category with the latest upturn the strongest since December 2015. Commercial work also rose at the fastest pace for just over two-and-a-half-years, while civil engineering activity increased only moderately. Firms noted that a lack of work to replace completed projects (particularly railway infrastructure work) continued to hold back growth in the civil engineering sub-sector.

New orders also saw their strongest increased since May 2017, with respondents noting a general

improvement in client demand led to successful contract negotiations on larger scale projects. In addition, rising sales volumes helped boost job creation in the sector, with the rate of employment growth the fastest since December 2015. Input buying also expanded at the strongest pace for just over two-and-a-half-years. Yet, greater purchasing activity led to the sharpest decline in supplier performance since July 2017.

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Input cost inflation eased to a three-month low in July, but remained strong in comparison to its post- crisis trend. Survey respondents widely cited rising fuel bills and higher prices for steel-related inputs.

Looking towards the future, despite a rise in tender opportunities companies are remaining cautious about their year-ahead business outlook. The degree of positive sentiment about future workloads was unchanged since June and remained weaker than the long-term survey average, with anecdotal evidence suggesting Brexit uncertainty continued to hold back business optimism for July.

Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply, said: "Favourable circumstances lay the foundations for success with an easing in cost pressures to a three-month low and a rekindled enthusiasm from clients to place orders held back by uncertainty.

"Residential and commercial building took the overall lead with the most robust performances since December 2015 and even civil engineering put on a slightly better show."

Mark Robinson, Scape Group Chief Executive, said the spring bounce back as seen in recent months looks set to continue into the summer.

"Across the sector there was an uplift in new business activity, with the housebuilding sector leading the way," he said.

"It is promising to see residential work at a two and a half year high and this rate of activity needs to be sustained to meet demand in the market."

(LM)