New work boosts construction firms

The fastest rise in new work for nearly two years boosted growth and confidence at the UK's construction firms in February.

A Markit/CIPS survey, in which a reading above 50 represents growth, rose to 54.3 from 51.4 in January - its highest level since last March.

Firms benefited from the biggest rise in new business for 21 months, which helped confidence increase for the fourth month in a row to the second highest level in 21 months.

All three categories of the construction industry saw growth in February, with commercial increasing at its fastest level since September 2010, while civil and housebuilders returned to growth.

However, there was a marginal fall in employment as companies made job cuts as part of reorganisations, while energy bills pushed inflation up further, albeit at the lowest level in two years.

The data will boost hopes the economy can avoid a recession after a 0.2% fall in GDP in the final quarter of 2011.

It comes after the survey yesterday revealed that the manufacturing sector continued to grow in February but at a weaker pace than expected with prices rising at their fastest pace for 19 years.

Markit economist Sarah Bingham said: "The improved performance of the construction sector adds to other positive data released on the UK economy.

"However, it remains to be seen whether GDP growth for the first quarter will be recorded and, if it is, any expansion is likely to be only modest as general economic conditions remain fragile."

The lift in confidence came as firms reported rising tender opportunities and hopes for an economic improvement.

The solid performance of the sector was even more impressive given the potential disruption caused by widespread snowfall last month.

Howard Archer, chief economist at IHS Global Insight, said: "While February's survey evidence is encouraging, the construction sector still faces a battle to achieve sustained decent growth.

"In particular, the Government's spending cuts are limiting overall expenditure on public buildings, schools and hospitals."

But he said that a decent reading for the powerhouse services sector on Monday would boost hopes for 0.5% GDP growth in the first quarter of 2012.

PA