Commercial work offers relief for UK construction in February

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The UK construction sector returned to growth in February, as new orders regain momentum and commercial projects are ‘woken from their slumber’

The UK construction sector 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/CIPS.

New orders also regained momentum as construction project starts increased in anticipation of improving UK economic conditions over the course of the year.

Extended supplier lead times persisted in February as vendors struggled with transport delays and stronger demand conditions.

Stretched global supply chains, greater shipping charges and rising commodity prices all contributed to the sharpest increase in average cost burdens across the construction sector since August 2008.

The headline seasonally adjusted UK Construction Total Activity Index posted 53.3 in February, up from 49.2 in January, to signal a solid increase in overall construction output. The index has registered above the 50.0 no-change mark in eight of the past nine months.

The figures

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 housebuilding 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.

Greater workloads encouraged additional staff recruitment. Although only modest, the rate of job creation was the fastest since March 2019.

Similarly, input buying picked up as construction firms prepared for new project starts. Improving order books and early signs that the vaccine rollout will release pent up demand also led to the strongest degree of construction sector optimism for over five years.

Meanwhile, purchasing prices increased at a rapid pace in February.

‘Issues did nothing to dampen builder enthusiasm’

Duncan Brock, group director at the Chartered Institute of Procurement & Supply, said: “On the one hand, February saw a welcome rise in overall output in the construction sector as commercial projects in particular were woken from their slumber and purchasing levels rose across the board for the ninth month in a row.

“On the other hand, 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.”

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