UK Construction Firms Most Confident Since Financial Crisis but Supply Shortage Looms

Confidence among UK construction firms has returned to levels not seen since before the financial crisis as a housing market recovery drives a sharp increase in house building.

Research firm Markit's monthly index for construction sector came in at 62.5, little changed from February and well above the neutral 50 mark, signifying another month of strong output growth.

It comes as the UK's housing market recovers from its post-financial crisis slump. Higher demand for new homes has been spurred on by a domestic economic recovery and government efforts to make mortgages easier to access, such as Help to Buy.

Construction firms are chasing profit from the resulting higher house prices by increasing their residential house building work.

"The rise in residential construction was one of the sharpest experienced over the past ten years, helped by strong demand for new development projects and supportive funding conditions," said Tim Moore, senior economist at Markit.

"The rise in residential construction was one of the sharpest experienced over the past ten years, helped by strong demand for new development projects and supportive funding conditions.

"Expectations for construction growth over the year ahead have now reached their highest since the start of 2007, and a strong pipeline of new work is fuelling job creation across the sector."

But limitations on the supply side threaten to hold back the resurgent construction sector, with materials and labour failing to keep up with rising output.

Moore said Markit's latest construction index, compiled from surveys of purchasing managers, does "little to dispel concerns that supplier capacity will become a fly in the ointment".

"Lead-times for the delivery of construction materials lengthened in March by one of the greatest amounts since the survey began in April 1997, while sub-contractor availability fell at the fastest rate for thirteen-and-a-half years," he added.