UK construction industry bounces back - The Guardian

But employment across the construction sector declined again. Photograph: Geoffrey Robinson/Rex Features

Britain's construction industry bounced back last month as activity increased following December's snow chaos.

The figures will calm fears triggered by the unexpected 0.5% contraction in the wider economy between October and December, although employment across the construction sector kept declining.

The monthly snapshot from Markit/CIPS shows the construction index jumped to 53.7 in January from December's reading of 49.1, which had been the first contraction in the sector in 10 months. Any reading above 50 indicates growth while below 50 signals contraction.

All three construction sub-sectors reported higher activity last month, for the first time since August. Civil engineering was the strongest while commercial construction extended its growth run to 11 months, and a slight increase in housebuilding in January ended a four-month period of contraction.

"The UK construction sector showed a welcome bounce back from the snow-related drop in activity late last year," said Chris Williamson, chief economist at Markit. "However, after estimating for the boost to activity in January resulting from the disruption to workflows in December, the underlying growth trend remains only very modest and well below the surging pace seen in the second quarter of last year."

Optimism among construction companies was the strongest in eight months as companies reported a rise in new orders. However, they continued to cut jobs, with the use of subcontractors falling at the sharpest rate since October 2009.

"This is good news for the government as the construction sector seems to have bounced back, suggesting it was the widespread chaos caused by the snow that had such an impact and hampered growth in December," said David Noble, chief executive of the Chartered Institute of Purchasing and Supply (CIPS).

Yesterday's PMI data for the manufacturing sector also offered encouragement for the Treasury, with factory activity hitting its highest level on record last month.

"Despite the growth of activity, an air of caution persists among construction companies as employment levels continue to fall. Some companies that are doing well are hiring but many more companies are continuing to adjust to lower workloads and deferral of projects. Until growth becomes sustained it is unlikely we will see employment levels rise substantially and consistently."