The construction industry remains at the heart of the UK’s post-Covid economic recovery, with April seeing another strong increase in UK construction output, according to the latest monthly IHS Markit / CIPS UK Construction PMI figures released today. (7/5/21).
Civil engineering enjoyed its steepest pace of growth since September 2014, as the bell-weather survey signalled that the recovery is now evenly balanced across the house building, commercial and civil engineering categories.
Looking positively ahead, construction companies remain highly upbeat about future growth prospects - even though demand and supply imbalances saw costs rose at the fastest pace since the PMI survey began in 1997.
The headline IHS Markit/CIPS UK Construction PMI Total Activity Index posted 61.6 in April, down only fractionally from March's six-and-a-half year peak of 61.7. Any figure above 50.0 indicates an overall expansion of construction output. The index has posted in growth territory in ten of the past eleven months, with January 2021 the exception.
Commercial work (index at 62.2) was the best-performing broad category of construction output in April, although the rate of expansion eased slightly since March. Survey respondents widely commented on a boost to client demand from rising business confidence and the reopening of the UK economy.
Civil engineering (index at 61.5) bucked the softer overall growth trend in April and signalled its fastest speed of recovery since September 2014. Construction companies often cited increased levels of work on major infrastructure programmes, including contract awards from HS2 and Highways England.
Meanwhile, house building (index at 61.2) continued to rise at a strong pace in April, but the rate of growth eased from March's recent peak (64.0). There were widespread reports of robust demand for residential building projects and new housing developments.
Total new work increased for the eleventh consecutive month in April. Moreover, the latest improvement in order books was the strongest for just over six-and-a-half years. This contributed to the steepest rate of job creation across the construction sector since December 2015.
Mirroring the trend for new business, input buying expanded at the fastest pace since September 2014. A rapid rise in demand for construction products and materials continued to stretch supply chains in April. The latest lengthening of suppliers' delivery times was the third-greatest since the survey began in 1997, exceeded only by those seen during the lockdown in April and May last year.
Construction firms mostly cited demand and supply imbalances, but some suggested that Brexit issues had led to delays with inputs arriving from the EU.
Higher prices paid for a wide range of construction items contributed to the fastest overall rate of cost inflation since the survey began in April 1997 (index at 84.6, up from 77.8 in March). Steel, timber and transportation were among the most commonly reported items up in price.
Looking ahead, construction companies remained highly upbeat about their growth prospects in April. More than half of the survey panel (57%) expect a rise in business activity during the next 12 months, while only 7% forecast a decline.
Tim Moore, economics director at IHS Markit, which compiles the survey, said: "The UK construction sector is experiencing its strongest growth phase for six-and-a-half years, with the recovery now evenly balanced across the house building, commercial and civil engineering categories. New orders surged higher in April as the end of lockdown spurred contract awards on previously delayed commercial development projects. This added to the spike in workloads from robust housing demand and the delivery of major infrastructure programmes such as HS2.”
Duncan Brock, group director at the Chartered Institute of Procurement & Supply, said: "The building blocks were in place in April as builders confirmed more work, more job opportunities and strong optimism for the next 12 months. The overall growth rate of new business strengthened to the fastest since September 2014 as all three sectors improved and civil engineering the laggard of last year gained the most momentum.
"Issues around supply chain performance acted as a drag on capacity however as supply constraints on essential materials increased to one of the third highest levels since 1997 when the survey began. Brexit issues remained a factor affecting deliveries from the EU and suppliers generally were struggling to meet the sudden rush in demand leading to shortages of basic materials.
"This inevitably led to the sharpest rise in cost inflation in a generation as builders scrambled to catch up on projects but the biggest rise in job creation since December 2015 also followed, signalling sustainable growth in the sector this summer."
Mark Robinson, group chief executive at SCAPE, said: “Despite the outlying risk posed by continued materials and skills shortages, the sustained output growth we’ve seen since January cements the construction industry’s position at the heart of the economic recovery. With confidence levels on the rise, it’s important that contractors maintain this momentum and use the sustained levels of investment from central government as a catalyst for positive change. Our recent consumer research indicates that the general public wholeheartedly endorse investment in construction projects that create social value.
“The pandemic has accelerated trends towards more conscientious, community-focused development and contractors who are most aligned to these values – particularly those supporting public sector contracts – will ultimately be best-placed to respond to this call in the months ahead.”
Joseph Daniels, CEO and founder of modular housebuilder the Etopia Group, said: “A rise is business optimism and workloads in the construction sector should translate into the creation of more jobs for the economy, but the industry’s long-term performance is still being threatened by a shortage of materials as the enormous US market becomes more reliant on importing steel and timber from abroad.”
Krishan Pattni, chief design officer at modular housebuilder TopHat echoed Daniels’ concerns and said: “There is an even greater need in this current climate for the construction industry to adopt sustainable practices to use materials more efficiently and to meaningfully cut down on waste, minimising the disruption caused by shortages. Modern methods of construction will have a significant role to play by utilising Design for Manufacture and Assembly processes and digital tools to optimise cut to size materials where possible through the supply chain helping to minimizing waste and maximise the utilisation of available materials.”
PMI data was collected between 12-29 April 2021.