Construction sector growth slows in August
Author: ross sturley cimcig
IHS Markit/CIPS have released their August data pointing to a setback for the recovery in UK construction output, with growth easing from the near five-year high seen during July. Survey respondents mostly suggested that a lack of new work to replace completed contracts had acted as a brake on the speed of expansion.
The headline seasonally adjusted IHS Markit/CIPS UK Construction Total Activity Index registered 54.6 in
August, down from 58.1 in July. Any figure above 50.0 indicates growth of total construction output. Higher
levels of activity have been recorded in each of the past three months, but the latest expansion was the
weakest over this period. All three broad categories of construction provided a weaker contribution to the
headline index in comparison to those seen in July.
House building has registered the strongest rebound since the stoppages of work on site in late-March due
to the coronavirus disease 2019 (COVID-19) pandemic. This trend continued in August, with the seasonally
adjusted Housing Activity Index posting well inside expansion territory (60.7). The equivalent figures for
commercial work (52.5) and civil engineering activity (46.6) were notably weaker than the headline index in
August.
Total new business volumes increased for the third month running during August, but the rate of
expansion remained only modest and slowed since July. Construction companies noted that economic
uncertainty and a wait-and-see approach among clients had limited their opportunities to secure new
work. However, there were again a wide range of comments from survey respondents in relation to the
strength of their order books, which largely mirrored the multi-speed recovery experienced across different
sectors of the UK economy.
Supply chain disruption persisted across the construction sector, which led to another sharp
downturn in vendor performance. Stock shortages and an imbalance of supply and demand for construction
inputs contributed to higher purchasing costs. The overall rate of input price inflation was the highest
since April 2019.
Despite reporting subdued new business intakes since the start of the pandemic, construction companies
reported an improvement in their business expectations for the year ahead. More than twice as many survey
respondents (43%) expect a rise in construction output over the next 12 months as those that anticipate a
fall (19%). This was often linked to hopes of a boost from major infrastructure projects and resilient public
sector construction spending.
However, an expected rise in business activity could not prevent a further drop in staffing numbers. The
rate of job shedding eased only slightly since July and remained among the fastest seen over the past decade.
Tim Moore, Economics Director at IHS Markit, which compiles the survey: “The latest PMI data signalled a setback for the UK
construction sector as the speed of recovery lost momentum for the first time since the reopening phase
began in May. House building remained the bestperforming area of construction activity, with strong
growth helping to offset some of the weakness seen in commercial work and civil engineering activity. The
main reason for the slowdown in total construction output growth was a reduced degree of catch-up on
delayed projects and subsequent shortages of new work to replace completed contracts in August.
“Another month of widespread job shedding highlighted the ongoing difficulties faced by UK construction
companies, with order books often depleted due to a slump in demand from sectors of the economy that have
experienced the greatest impact from the pandemic.
“More positively for the employment outlook, business expectations climbed to a six-month high in August as
construction firms turned their hopes towards a boost from major infrastructure work and reorienting their
sales focus on new areas of growth in the coming 12 months."