Construction output slips back in August

A ‘wait and see’ approach amongst construction buyers held back output for the month of August, according to the monthly IHS Markit/CIPS UK Construction Total Activity Index, which registered 54.6 in August, down from 58.1 in July. Any figure above 50.0 indicates growth of total construction output.

Survey respondents mostly suggested that a lack of new work to replace completed contracts had acted as a brake on the speed of expansion.

House building registered the strongest rebound since the stoppages of work on site in late-March due to the COVID-19 pandemic, a trend which continued into August, with the sector showing an index figure of 60.7. Commercial work, at 52.5 and civil engineering at46.6were 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.

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.

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%).
However, 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 said: “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.

“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.”

Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply said: “The momentum in the sector’s recovery hit a bump in the road in August with a sudden slowdown in output growth and tender opportunities, while employment trends remained the most fragile in a decade. Though residential building remained the strongest, it too was showing signs of strain. In addition, there were ongoing difficulties in supply chains which hampered the sourcing of raw materials. Delivery times lengthened in August as a result of stock shortages at suppliers and cost increases were the highest since April 2019.

“Even with all these obstacles, builders were at their most optimistic since the beginning of the year. This glass half full attitude will have to carry companies into
the autumn as the UK economy remains delicate and susceptible to more turbulence.”