Construction output rises at sharpest rate since September 2014

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UK construction output expanded at the sharpest rate since September 2014 in March, as housebuilding, commercial work and civil engineering offer a welcome boost

The IHS Markit/CIPS UK Construction Total Activity Index registered 61.7 in March, up sharply from 53.3 in February.

The latest reading signalled the strongest rate of construction output growth since September 2014.

Housebuilding was the best-performing category (64.0), with the fastest pace of growth since July 2020. Strong increases in activity were also seen in commercial construction (62.7) and civil engineering (58.0) in March, with the index readings for both segments the highest since the second half of 2014.

Survey respondents commented on the mobilisation of delayed projects, especially in areas such as hospitality, leisure, and office development. There were again reports of a boost from major infrastructure projects in March, as well as higher workloads due to greater spending on residential construction work and rising new home sales.

Improving client demand and contract awards on projects that had been put on hold earlier in the pandemic contributed to a steep upturn in new orders during March. The rate of expansion accelerated to its fastest since September 2014.

Forthcoming new project starts spurred a solid rise in employment numbers, with the rate of job creation the strongest for over two years in March.

Construction companies also signalled a sharp increase in purchasing volumes in response to greater workloads.

The latest upturn in input buying was the steepest since November 2020. Higher demand for construction products and materials contributed to longer wait times for deliveries by suppliers. Around 41% of survey respondents reported longer delivery times from suppliers in March, while only 1% saw an improvement. Supply constraints and logistics issues were commonly reported by construction companies, especially for imported items.

Imbalanced demand and supply for construction inputs led to the steepest increase in purchasing prices since August 2008. Survey respondents widely noted that suppliers had cited Brexit and Covid-19 as reasons for price hikes in March.

‘Construction full of the joys of spring’

Duncan Brock, group director at the Chartered Institute of Procurement & Supply, said: “Construction was full of the joys of spring in March with a sudden leap into solid growth fuelled by across the board rises in workloads in all sectors.

“The commercial pipeline was particularly spectacular giving its best performance since late-2014.

“This upturn led to a significant boost in hiring levels with the fastest upturn in job creation since December 2018 offering a clear sign that companies are feeling more positive in planning for new builds and refurbishments of current properties.

“Business confidence was also standing tall with future optimism about the next 12 months the highest since June 2015 which suggests it is mostly plain sailing now that lockdowns are ending and vaccine programmes are underway.

“The unfortunate spanner in the works comes in the form of the steepest inflationary rise in raw materials and other construction items since August 2008 at the height of the last commodity price cycle.

“Supply chains are still underperforming and almost half of the survey respondents said they had experienced longer delays and higher costs. If this continues, it could easily cool the sector down a notch.”

Mark Robinson, group chief executive at SCAPE, said: “The construction industry continues to resist the shock of the pandemic in an impressive fashion and position itself at the forefront of the economic fight back.

“The sustained output growth recorded in March is a far cry from the record-low levels reported this time last year, reaffirming just how far the industry has come since the first lockdown.

“As the UK progresses out of lockdown, it’s critical now that we build on the lessons learned over the past 12 months. Backed by the Construction Playbook, every project must contribute towards a better future and add positive value to the local community.

“To that end, it’s encouraging to see the government committing to a new inquiry to shape and accelerate the industry’s net-zero capabilities, as it looks to truly build back better.”

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