Fastest rise in construction output for four months
UK construction companies indicated a sharp increase in business activity during November, led by the fastest upturn in commercial work since July as clients continued to boost spending in response to the reopening of the UK economy. Commercial activity helped offset a slowdown in housebuilding and signs that the worst phase of supplier delays may have passed.
At 55.5 in November, up from 54.6 in October, the headline seasonally adjusted IHS Markit/CIPS UK Construction PMI® Total Activity Index signalled a robust and accelerated expansion of overall construction activity. The index has now posted above the 50.0 no-change value for ten consecutive months and the latest reading pointed to the strongest rate of expansion since July.
Tim Moore, Director at IHS Markit, which compiles the survey said: “November data highlighted a welcome combination of faster output growth and softer price inflation across the UK construction sector. Commercial building led the way as recovering economic conditions ushered in new projects, which helped compensate for the recent slowdown in house building. Major infrastructure work also boosted construction activity in November, as signalled by the fastest growth in the civil engineering category since August.
“Input price inflation remains extremely strong by any measure, but it has started to trend downwards after hitting multi-decade peaks this summer. The latest rise in purchasing costs was the slowest since April, helped by a gradual turnaround in supply chain disruption and a slight slowdown in input buying. Port congestion and severe shortages of haulage capacity were again the most commonly cited reasons for longer lead times for construction products and materials.”
Steve Plaskitt, Partner at MHA, believes that despite output rising, the sector faces multiple challenges with persistent materials and labour shortages, high inflation and a lack of government stimulus posing long term threats to the commercial and residential property sectors. He said: “The UK construction output increased in November, however shortages of labour and raw materials will continue to hamstring the UK’s construction sector. The impact of distribution issues to and from UK ports and the lack of availability of staff with middle range technical and manual skills are weakening output, with labour shortages becoming so problematic that firms are resorting to poaching staff from competitors to fill employee gaps.”
Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply, said: “Commercial orders were the strongest, picking up the slack from the subdued housing and civil engineering sectors and demonstrating that business confidence in the UK economy was improving.
“Adding to this positivity was signs of recovery in supply chain performance with just 47% of construction firms reporting longer waiting times, which is the smallest number for eight months. Even with this glimmer of hope that the pressure on deliveries was easing, purchasing remained at higher level to counteract disruptions from ongoing driver shortages and port delays as supply chain managers bought more than their immediate need.
“Job hiring growth was still maintained in November but was the weakest since March. Builder optimism was somewhat flat as the costs of building still remained high and firms struggled to stay competitive.”
