As you’re reading Advantage’s blog, there’s a good chance that you work in construction or a related sector. So you probably won’t be surprised to read that the construction industry reported a “steep rebound” in output in June as the UK lockdown eased and more building sites reopened.
Last month, we wrote about how construction and engineering has been strengthening the UK jobs market. And this month, we’re seeing more encouraging signs for the sector with Sky News (among others) reporting that: The closely-watched IHS Markit/CIPS construction purchasing managers’ index (PMI) had a reading of 55.3 last month, from 28.9 in May.
Any reading above 50 shows an increase in activity but analysts had expected June’s reading to be 46.
A stamp duty holiday?
While any dreams of jetting off for a hard-earned break have been dashed for the Advantage team and most others so far this summer, it seems that a different kind of holiday is on the horizon.
As reported by the Guardian, Rishi Sunak is expected to outline plans for a six-month stamp duty holiday when he reports to parliament this week on further schemes to support the economy as the lockdown eases.
Sunak is considering proposals to raise the threshold at which homebuyers start paying stamp duty, targeting the bottom end of the housing market.
Currently the levy is not charged on the first £125,000 of the property selling price, with a 2% rate up to £250,000 and 5% on the next £675,000.
The new threshold, which could stimulate demand through to spring next year, is likely to be set at somewhere between £300,000 and £500,000.
Last year house building reached a 30-year annual high of 241,000 homes, but level of new starts collapsed in the first six months of the year. Property firms have lobbied hard in recent weeks for tax breaks to boost demand, telling Sunak it is essential to prevent widespread job losses.
A ‘sharp’ return to growth
Construction News noted that Office for National Statistics figures published last month showed that the value of construction activity collapsed by more than £5.1bn in April alone.
IHS Markit and the Chartered Institute of Procurement and Supply (CIPS), which publish the data, said June’s index “pointed to a sharp turnaround in the performance of the UK construction sector” and that the reopening of sites had helped to “boost business confidence”. Their report added that the jump recorded in June was the fastest expansion in activity since December 2015.
IHS Markit economics director Tim Moore said:
“The strong rebound in construction activity provides hope to other sectors that have suffered through the lockdown period. While it has taken time for the construction supply chain to adapt and rebuild capacity after widespread business closures, there is now clear evidence that a return to growth has been achieved.”
Housebuilding was the best-performing part of the sector in June, with 46 per cent of respondents reporting increased activity and only 27 per cent a reduction. Commercial work and civil engineering also returned to growth in June, although the recovery was “softer” than in housebuilding.
Although those working in construction and related sectors will no doubt welcome the latest figures, particularly the sharp increase in housebuilding activity, most will feel that further government support for the sector, including the proposed stamp duty holiday, will nevertheless be needed to help safeguard jobs and support the industry’s return to growth during a particularly turbulent period. We have a feeling we won’t be alone in awaiting the Chancellor’s expected announcement this week with interest.
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