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New orders boost construction output

7th May 2021

Output in UK construction during April was boosted by the fastest rise in overall new orders since September 2014. However, demand and supply imbalances has seen inflation pick up for the seventh month in a row and reach its highest since the survey began in April 1997.

The headline IHS Markit/CIPS UK Construction PMI® Total Activity Index posted 61.6 in April, down only fractionally from March’s six-and-a-half year peak of 61.7. The index has posted in growth territory in ten of the past eleven months, with January 2021 the exception.

Tim Moore, Economics Director at IHS Markit, which compiles the survey, said: “The UK construction sector is experiencing its strongest growth phase for six-and-a-half years, with the recovery now evenly balanced across the house building, commercial and civil engineering categories.

“New orders surged higher in April as the end of lockdown spurred contract awards on previously delayed commercial development projects. This added to the spike in workloads from robust housing demand and the delivery of major infrastructure programmes such as HS2.”

Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply, said: “Issues around supply chain performance acted as a drag on capacity however as supply constraints on essential materials increased to one of the third highest levels since 1997 when the survey began. Brexit issues remained a factor affecting deliveries from the EU and suppliers generally were struggling to meet the sudden rush in demand leading to shortages of basic materials.

“This inevitably led to the sharpest rise in cost inflation in a generation as builders scrambled to catch up on projects but the biggest rise in job creation since December 2015 also followed, signalling sustainable growth in the sector this summer.”

Commercial work (index at 62.2) was the best-performing broad category of construction output in April, although the rate of expansion eased slightly since March. Survey respondents widely commented on a boost to client demand from rising business confidence and the reopening of the UK economy.

Civil engineering (index at 61.5) bucked the softer overall growth trend in April and signalled its fastest speed of recovery since September 2014. Construction companies often cited increased levels of work on major infrastructure programmes, including contract awards from HS2 and Highways England.

Meanwhile, house building (index at 61.2) continued to rise at a strong pace in April, but the rate of growth eased from March’s recent peak (64.0). There were widespread reports of robust demand for residential building projects and new housing developments.

The growth in new orders has contributed to the steepest rate of job creation across the construction sector since December 2015.

The survey reported that construction companies remained highly upbeat about their growth prospects in April. More than half of the survey panel (57%) expect a rise in business activity during the next 12 months, while only 7% forecast a decline.

Source: Spector magazine