Pound jumps as construction hits six-and-a-half-year high

There was rising levels of output across all three areas of construction, but it was residential that remained the best performing sub-category, with the latest expansion the sharpest since November 2003. It was boosted by growing demand for new homes and improving confidence within the UK property market, Markit said.

^{Source: Markit}

Commercial building work and civil engineering activity both increased sharply during January, and in each case the latest expansion was the steepest since the summer of 2007.

The number of new and existing homes coming onto the market is lagging demand, however, putting upward pressure on housing prices.

"January's survey provides reassurance that the UK construction recovery remains on track," said Tim Moore, senior economist with Markit, which compiles the data.

Following the data the pound spiked against the dollar, rising 0.24pc to $1.6343.

^{Pound against dollar on Tuesday. Source: Bloomberg}

The building industry was hammered by the financial crisis of 2007-09. The pick-up in construction comes as Britain's housing market has been boosted by falling unemployment, low interest rates and government programmes.

Markit said commercial building work and civil engineering activity increased in January to the fastest rate since mid-2007. It said stronger demand for construction materials was putting pressure on supply.

"While input cost inflation eased in January, there were again signs that some suppliers are struggling to adjust to greater demand for construction materials," Moore added.

On Monday, a similar survey showed the swift upturn in British factory activity eased slightly in January.

Construction accounts for less than 7pc of Britain's economy.

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