A SURGE in house building spurred a new wave of optimism in the UK construction sector as it achieved its best performance for three years, the latest figures show.
The reading of 57 on the closely-watched Markit/CIPS purchasing managers' index was the best since June 2010 and a steep rise from 51 recorded in June. A reading of 50 separates growth from contraction.
The figures add to hopes of a sustained recovery in the sector after official figures showed it grew 0.9 per cent in the second quarter of the year, though it remains 16.5 per cent off pre-recession levels.
Construction has been buoyed by flagship initiatives including Funding for Lending, which encourages banks to offer mortgages, and Help to Buy, which offers loans and guarantees to help buyers with small deposits.
The survey results were the third month in succession the construction index was above the no-change level of 50.
Residential building activity was by far the strongest area as it recorded its sixth month of improvement in a row.
But there was also a return to expansion for civil engineering, while commercial construction output rose at its strongest pace since May 2012.
Firms attributed the overall improvement to a marked improvement in demand for housing alongside a general rise in spending amid signs of an improving UK economy.
Optimism about the year ahead reached its strongest level since May 2010, leading to a rise in employment levels for the second month running.
"July's survey highlights a new wave of optimism across the UK construction sector, with companies reporting a pace of expansion in excess of anything seen over the past three years," said Tim Moore, senior economist at survey compiler Markit.
David Noble, chief executive at the Chartered Institute of Purchasing and Supply, said homes are the "beating heart" of the rapid recovery in the construction sector, which is also backed by a solid expansion in civil engineering and commercial activity.
He said confidence was the highest since the coalition's austerity policies began in 2010, suggesting growth could be sustained into the third quarter.
"Of critical importance to the construction sector going forward is that the economy and the housing market sustain their recent improvement over the coming months, and that this increasingly stimulates building work," said Howard Archer, chief UK and European economist at IHS Global Insight.
"It currently appears that housing market activity is really stepping up a gear, while the Government's Help to Buy initiatives in the budget to boost housing market activity was also welcome news for house builders."
But he said construction continued to be constrained by the impact of austerity measures on public sector projects, while it may take some time for private commercial activity to show a marked pick-up.
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