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Construction growth eases

8 September 2021

Construction growth eases

Statistics from the latest monthly survey of construction companies responding to the Purchasing Managers’ Index (PMI) survey for August show some fascinating features about the ongoing state of the market. 

Compiled by IHS Markit for the Chartered Institute of Procurement & Supply (CIPS), the report shows UK construction companies signalling a further increase in output volumes during August. The pace of growth eased from the previous survey period, although perhaps this is not surprising at a time when many people took a deserved summer break.  

There were softer expansions across the three main markets of housebuilding, commercial work and civil engineering activity as well as in new order growth. But these were still expansions, even after a prolonged period of well-publicised demand. 

Indeed, the survey reports sustained, and severe, supply chain disruption in August, which contributed to an accelerated rise in input prices that was the second sharpest in the history of the survey.

The headline seasonally adjusted index posted 55.2, down from 58.7 in July, indicating activity has expanded in each of the last seven months (50.0 would indicate no change). The rate of increase eased to the softest since February as restricted supply of materials and transport began to weigh on overall construction activity. 

Commercial work (index at 56.0) was the best performing broad category of construction output in August, though the rate of expansion eased to the slowest for six months.

This was followed closely by housebuilding (55.0), while civil engineering remained the slowest growing sub-sector (54.8).

Businesses noted a continued resumption of projects that had been delayed due to Brexit and the Covid-19 pandemic, though client confidence was dampened by volatility in raw material supplies and increased costs.

Comment: Statistics always require careful interpretation and these findings are no exception. First, while the rate of growth slowed, it still increased - at a time when many hirers and contractors report relentless levels of demand. 

Indeed, the report cites anecdotal evidence of ongoing material shortages aggravated by a lack of transport and freight availability, leading to supply disruption and price rises: 84% of supply chain managers reported paying more for materials. 

Duncan Brock, Group Director at the CIPS, describes ongoing Covid restrictions, Brexit delays and shipping hold-ups as being responsible as “builders were unable to complete some of the pipelines of work knocking on their door”. One wonders how the industry would have coped with demand if materials like bricks and timber had been easier to source. 

And looking ahead, construction companies remained “highly upbeat about their growth prospects over the coming 12 months”, with expectations of a rise in new contract awards across all sub-sectors of construction. 

Picture: Thomas Wolter/Pixabay 

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