Construction 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. New orders also regained momentum but extended supplier lead times persisted as vendors struggled with transport delays and stronger demand.
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. 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.
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 rollout spurred contract awards on projects that had been delayed at an earlier stage of the pandemic.
“Stretched supply chains and sharply rising transport costs were the main areas of concern for construction companies in February. Reports of delivery delays remain more widespread than at any time in the 20 years prior to the pandemic, reflecting a mixture of strong global demand for raw materials and shortages of international shipping availability. Subsequently, an imbalance of demand and supply contributed to the fastest increase in purchasing costs across the construction sector since August 2008.”
Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply: “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. Though delivery times were still deteriorating as port disruptions made their mark, it was to a lesser degree compared to January suggesting the worst of the squeeze due to Brexit may have eased. Supply chain managers found themselves spinning a number of plates with creative ways to get stock including sourcing more local supply for some.
“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. With part-time furlough options now in place, some constructors will be mixing and matching their approaches to meet the ebb and flow of projects and capacity in the coming months.”
Kate Kirby, partner in the Construction team at DWF, commented: “The future continues to look bright for the sector, which has also recorded a slight rise in new jobs. There is a wide degree of optimism surrounding the successful vaccine roll out that is perhaps reflected in this month’s data. As the UK emerges from the current lockdown conditions as the year progresses, the sector is set to continue on its upward path.”