Industry

04 MAR 2021

UK CONSTRUCTION ENJOYS SOLID RETURN TO GROWTH IN FEBRUARY

UK construction companies experienced a solid return to growth in February after a setback at the start of 2021, according to the latest PMI data compiled by IHS Markit. 

The headline seasonally adjusted IHS Markit/CIPS UK Construction Total Activity Index posted 53.3 in February, up from 49.2 in January, to signal a solid increase on overall construction output. The index has registered above the 50.0 no-change mark in eight of the past nine months.

New orders also regained momentum as project starts increased in anticipation of improving UK economic conditions over the course of the year.

Residential work remained the strongest area of growth in February, although the speed of recovery eased slightly since January. There were some reports citing temporary delays on site arising from adverse weather and supply chain issues (especially for timber).

The slowdown in house building was more than offset by the sharpest rise in commercial work since last September and a slower fall in civil engineering activity. Survey respondents commented on contract awards for commercial building that had been delayed earlier in the pandemic and some reported a boost from infrastructure work related to major transport projects.

New order volumes increased for the ninth consecutive month in February and the rate of expansion accelerated from the subdued pace seen at the start of the year. Construction companies cited improving demand across a range of sources, including residential development, new opportunities in the commercial segment and public sector infrastructure spending.

Greater workloads encouraged additional staff recruitment. Although only modest, the rate of job creation was the fastest since March 2019. Improving order books and early signs that the vaccine roll-out will release pent up demand also led to the strongest degree of construction sector optimism for over five years.

Meanwhile, purchasing prices increased at a rapid pace in February. Survey respondents cited an imbalance of demand and supply, alongside inflationary pressures from the pass through of higher transportation costs.

Tim Moore, economics director at IHS Markit, which compiles the survey, said: "Construction work regained its position as the fastest growing major category of UK private sector output in February. The rebound was supported by the largest rise in commercial development activity since last September as the successful vaccine roll-out spurred contract awards on projects that had been delayed at an earlier stage of the pandemic.”

Duncan Brock, group director at the Chartered Institute of Procurement & Supply, said: "On the one hand, February saw a welcome rise in overall output in the construction sector as commercial projects in particular were woken from their slumber and purchasing levels rose across the board for the ninth month in a row. On the other hand, strong demand for products added pressure to already impaired supply chains as sellers battled with raw material shortages, and the costs of business rose at the fastest rate since August 2008.

"These ongoing issues did nothing to dampen builder enthusiasm as optimism for the future rose to its highest since October 2015 and this return to confidence lead to job hiring at the fastest rate for almost two years.” 

Mark Robinson, group chief executive at public sector procurement specialists SCAPE, said: “Following a dip in activity at the start of the year, February’s return to form – combined with the initiatives announced in yesterday’s Budget – is likely to inspire greater confidence among contractors, as the UK emerges from lockdown. 

“However, whilst the easing of restrictions is likely to stimulate an increase in output in the coming months, a steady stream of investment in communities and infrastructure is still necessary to ensure the construction industry can support and sustain long-term economic growth. 

“The immediate £12bn earmarked for the treasury’s new National Infrastructure Bank will play a vital role in that respect, but the projects this will enable need to be identified as soon as possible, if we are to achieve the regeneration needed post-pandemic.”

February’s PMI data was collected between 11-25 February 2021.

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