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Upsurge in housing is helping to create more jobs

JOB creation within the UK construction sector is at record levels, according to a closely watched market survey.

This Markit/CIPS Purchasing Managers' Index (PMI) for June rose to 62.6, up from 60.0 in May, well ahead of a forecast for a fall to 59.5.

The figures represent the fastest expansion of construction activity since February, it also found that employment growth is at its strongest since the survey began in April 1997.

Analysts say the construction boom is due, in part, to the resurgence within the housing market.

Residential construction experienced a rapid increase in June, while commercial building output also hit a five-month high.

Chris Williamson, chief economist with Markit, argues the housing surge is likely to bring further increases in employment.

He said: "The need to boost capacity to meet surging demand for building encouraged construction firms to take on extra staff at a rate never previously recorded in the survey's 17-year history.

"Employment in the sector has increased each month for just over a year as recovery has taken hold.

"With business confidence about the year ahead remaining buoyant in June, further strong growth of hiring is likely as we move into the second half of the year."

The growth in the construction sector comes as the manufacturing PMI showed activity had expanded at its fastest monthly rate since November.

Mr Williams believes the performance of both sectors could see the Bank of England raise interest rates earlier than anticipated.

However, while the PMI paints an encouraging picture of recovery, the possibility of a skills deficit threatens to stifle progress.

"The growth is coming at a price," Mr Williams said.

"Specifically, construction companies had to pay their subcontractors higher rates, amid record skill shortages."

Mr Williams highlighted the average rates charged by subcontractors had eased only slightly from the record levels seen in May.

He said: "The upward pressure on pay rates reflects widespread shortages of suitable subcontractors.

"Survey respondents have reported by far the steepest deterioration in subcontractor availability ever recorded by the survey in recent months, albeit with a very slight easing in June.

"The survey suggests that widespread skill shortages have developed after many tradesmen and subcontractors left the sector, or left the country, during the recession."

David Noble, chief executive at the Chartered Institute of Purchasing and Supply (CIPS), also stressed the need to strengthen the supply line to ensure growth.

He said: "Whilst the headline figures this month painted a positive picture, let's not forget about the underlying pressures on building materials and manpower at supplier levels.

"Delivery times continued to lengthen a great deal and prices were pushed up.

"Pressure on suppliers needs to be watched if the sector wants to maintain a steady growth."

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home improvement

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