Builders’ bounce-back business booms

Output in the UK construction industry in March 2021 expanded at its fastest pace since September 2014. That’s according to the latest  IHS Markit/CIPS UK Construction Total Activity Index, which registered 61.7 in March, up sharply from 53.3 in February.

Housebuilding (index at 64.0) was the best-performing category, with growth the fastest 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.

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Survey respondents highlighted  re-starting of delayed projects, especially in areas such as hospitality, leisure, and office development. There were 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.

Higher demand for construction products and materials contributed to longer wait times for deliveries by suppliers. Around 41% of the survey panel reported longer delivery times from suppliers, while only 1% saw an improvement. Supply constraints and logistics issues were commonly reported, especially for imported items. Purchasing prices rose at their steepest level since August 2008, with suppliers citing both Brexit and COVID-19 as reasons for price hikes in March.

Growth projections were the most upbeat since June 2015, reflecting confidence in the UK economic outlook, the improving pandemic situation and pent up demand.

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.

” 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.”

However, he added a note of caution. “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,” he said.

“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.”

About Fiona Russell-Horne

Group Managing Editor across the BMJ portfolio.

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