Lack of new work slows construction recovery

The latest UK Construction Total Activity Index from IHS Markit and the Chartered Institute of Procurement and Supply (CIPS) has found that in August the recovery in UK construction output, saw growth easing from the near five-year high seen during July. Survey respondents suggested that a lack of new work to replace completed contracts had acted as a brake on the speed of expansion.

The headline seasonally UK Construction Total Activity Index registered 54.6 in August, down from 58.1 in July. All three broad categories of construction provided a weaker contribution to the headline index in comparison to those seen in July.

Tim Moore, Economics Director at IHS Markit, which compiles the survey, said: “The latest PMI data signalled a setback for the UK construction sector as the speed of recovery lost momentum for the first time since the reopening phase began in May. House building remained the best- performing area of construction activity, with strong growth helping to o set some of the weakness seen in commercial work and civil engineering activity. The main reason for the slowdown in total construction output growth was a reduced degree of catch-up on delayed projects and subsequent shortages of new work to replace completed contracts in August.

“Another month of widespread job shedding highlighted the ongoing difficulties faced by UK construction companies, with order books often depleted due to a slump in demand from sectors of the economy that have experienced the greatest impact from the pandemic.

“More positively for the employment outlook, business expectations climbed to a six-month high in August as construction firms turned their hopes towards a boost from major infrastructure work and reorienting their sales focus on new areas of growth in the coming 12 months.”

Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply, said: “New order gains slowed across all sectors, continuing COVID-19 anxiety amongst clients meant many projects still remained on ice. Though residential building remained the strongest, it too was showing signs of strain.

“In addition, there were ongoing difficulties in supply chains which hampered the sourcing of raw materials. Delivery times lengthened in August as a result of stock shortages at suppliers and cost increases were the highest since April 2019.

“Even with all these obstacles, builders were at their most optimistic since the beginning of the year. This glass half full attitude will have to carry companies into the autumn as the UK economy remains delicate and susceptible to more turbulence.”

Kate Kirby , Partner in the Construction & Infrastructure practice at global legal business, DWF, said:“One of the biggest issues facing the sector, which has largely remained active during the pandemic, is the shortage of access to materials and appropriate subcontractors. Looking ahead, the sector should prepare for a few difficulties as furlough schemes come to an end.

“In a post–pandemic world, there will still be a requirement for more homes, urban regeneration, improved infrastructure, improved offices, retail space and more distribution facilities. We all know from past downturns that a robust construction sector will emerge but how and when, we just do not know.”

Jessica Levy, Director of Communications of the Federation of Master Builders (FMB), said: “The slowdown in growth reported in Construction PMI points to the need for policies which sustain much-needed jobs and activity, and give consumers confidence to invest. The Green Homes Grants scheme has the potential to do this, but just weeks away from its roll out, the Government needs to step up support for builders to gain recognition for their competence and high quality workmanship and register for the scheme.”