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Relief as Britain's building industry rebounds

The UK economy has been given some welcome relief as a survey reveals a bounceback in housebuilding activity boosted the construction sector last month.

The Markit/CIPS Purchasing Managers' Index, where a reading of more than 50 represents growth in construction activity, showed the sector grew at 54 in May, up from 53.3 the previous month.

A return to growth for housebuilding offset a marked decline in civil engineering work, leading to a bigger-than-expected acceleration in overall growth for the construction sector.

Analysts said the figures suggest the construction sector, which makes up 6.8% of the total economy, will contribute positively to GDP growth in the second quarter after shrinking by 4% in the first three months of the year.

The construction sector has been one of the most volatile areas of the economy in recent quarters, swinging from strong growth in the middle of last year to contraction in the last quarter of 2010 and first quarter of 2011.

A further rise in new business and the release of previously mothballed projects supported the latest expansion in activity, the survey said.

There was further cheer as the survey reported the first increase in employment in the sector for 10 months, but higher raw material prices are continuing to drive cost inflation.

Howard Archer, chief UK and European economist at IHS Global Insight, said that despite yesterday's figures, the construction sector still faces a challenging environment, which is likely to limit activity over the coming months.

He said: "In particular, the coalition Government's extended pruning of public spending will clearly limit expenditure on public buildings, schools, hospitals and infrastructure."

John Armstrong, who heads up the Construction Employer's Federation, believes the sector in Northern Ireland continues to lag behind the rest to the UK.

"The construction industry in Great Britain has been faring much better than the local industry. Construction output in Northern Ireland has fallen by 30% over the last three years and indications are that it is still falling.

"Official figures show that Northern Ireland's construction output in 2010 was £865m less than it was in 2007. Due to construction's multiplier effect this equates to a £2bn loss in the wider economy."