Commercial work drives construction back to growth

UK construction companies experienced a return to growth in February after a January dip, buyers have reported.

The IHS Markit/CIPS UK Construction Total Activity Index posted 53.3 in February, up from 49.2 in January (where 50 indicates no change), driven by commercial work.

New orders also regained momentum as project starts increased in anticipation of improving UK economic conditions.

But companies were still grappling with extended supplier lead times, as vendors struggled with transport delays and stronger demand conditions, buyers reported. They recorded the sharpest increase in average cost burdens across the construction sector since August 2008.

Residential work remained the strongest area of growth in February, although the speed of recovery eased slightly since January, amid reports of temporary delays on site arising from adverse weather and supply chain issues (especially for timber).

Meanwhile commercial work experienced its sharpest rise since last September and a slower fall in civil engineering activity. Survey respondents said that contract awards for commercial building that had been delayed earlier in the pandemic were behind the increase.

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.

And although only modest, the rate of job creation was the fastest since March 2019.

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.

“House building is still the engine of recovery for the construction sector, although there was a loss of momentum since January as adverse weather and longer wait times for materials contributed to some temporary delays on site.

“Civil engineering activity has been somewhat subdued in recent months, but survey respondents continued to cite the positive outlook for infrastructure work on major transport projects as a factor helping to boost confidence in the construction sector.

“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.”