Pace of construction output recovery begins to slow
October saw the weakest rise in construction output since the recovery began in June. House building remains the strongest-performing area but concern grows as employment falls, despite faster increase in new work.
Easing in output growth was revealed in the October IHS Markit/CIPS UK Construction Total Activity Index to 53.1, from 56.8 in September. The index has stayed above its 50.0 no-change mark since June.
Tim Moore, Economics Director at IHS Markit, which compiles the surve, said: “The construction sector was a bright spot in an otherwise gloomy month for the UK economy. Another sharp rise in house building helped to keep the construction recovery on track, albeit at a slower speed than in the third quarter of 2020. Commercial work also contributed to growth in the construction sector, while civil engineering remained the main area of concern as activity in this category dropped for the third month running.
“Supply chain difficulties persisted in October, as signalled by a sharp lengthening of delivery times for construction products and materials. Purchasing prices increased as a result of demand outstripping supply for construction inputs, with the rate of cost inflation hitting an 18-month high in October.”
Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply, said: “Higher levels of purchasing to meet the demands of the biggest rise in new orders since December 2015, were met with roadblocks of material shortages and the highest cost inflation since April 2019. Supplier delivery times acted as a drag on completion as builders rushed to finish work in hand and meet new build requests.
“The largest blot on the landscape was the number of redundancies and job shedding reported by construction firms, though builders remained relatively cheerful about the next 12 months. The strength of the pipeline of new work especially from a robust housing market means the sector is moving in the right direction and hopeful of getting through the winter unscathed.”
Looking ahead, construction companies reported optimism towards their prospects for the next 12 months, despite concerns about the wider economic outlook. Around 45% of the survey panel anticipate a rise in output during the year ahead, while only 14% forecast a reduction.
