‘Sustained rebound’ for construction in December

UK construction businesses enjoyed a “sustained rebound” in December 2020, according to construction buyers.

Stronger order books helped to drive recovery in the sector,
with buyers reporting that work that had been delayed earlier in 2020 as a
result of the coronavirus pandemic was finally coming on stream.

The IHS Markit/CIPS UK Construction Total Activity Index
posted a score of 54.6 in December (where 50 indicated no change), which was broadly
flat on the score of 54.7 registered in November. It was the seventh consecutive
month that the Index scored above 50.

Buyers indicated that there was another sharp rise in house
building during December, while commercial activity also expanded, albeit at the
slowest rate of growth since the recovery began in June 2020. Civil engineering
was the weakest performing category, with activity falling for the fourth time
in the past five months.

Total new orders increased at a “strong pace” in December,
with buyers noting improving client demand, alongside a boost in business wins
on projects that had been deferred since the start of the pandemic.

Purchasing prices increased at the steepest pace for just
under two years, reflecting supply shortages and strong demand for construction
inputs. Buyers often cited rising prices for timber and steel.

Half of buyers surveyed forecast a rise in business activity
over the course of 2021, with only 10% anticipating a decline, which signalled
the strongest optimism across the sector since April 2017.

Tim Moore, economics director at IHS Markit, which compiles
the survey, said: “December data illustrated a positive end to the year
for the UK construction sector, mostly fuelled by a sharp rebound in house
building. Overall output growth has slowed in comparison to the catch-up phase
last summer, but now it is encouraging to see the recovery driven by new
projects and stronger underlying demand.

“A sustained improvement in construction order books
resulted in a rise in employment numbers for the first time in nearly two years
and the most optimistic growth expectations since April 2017. Construction
companies are hopeful that higher demand will broaden out beyond residential
projects in the next 12 months, led by infrastructure spending and a potential
rebound in new commercial work from the depressed levels seen during the
pandemic.”

Mark Robinson, group chief executive at public procurement
body Scape, added: “Despite the latest output levels, the construction industry
continues to experience challenges. Even with sites remaining open, the impact
of a third national lockdown and increased social distancing measures are
likely to affect the speed at which future projects are brought forward,
including decisions on private investment and important urban regeneration.
 

“The public sector continues to be the main vehicle for
contractor growth and investment in communities, backed by increased government
funding, as has been the case since sites reopened last summer. These projects
remain best-placed to set the standard for the progressive and ambitious goals
set out in the new Construction Playbook.”