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September surge for construction purchasing

Construction industry activity grew at its fastest rate for five years as the latest IHS Markit/CIPS UK Construction Total Activity Index showed 56.8 in September up from 54.6 in August. In April it had plummeted to 8.2 because of the UK lockdown.

Respondents were also the most confident about their future prospects for seven months.

The strongest performing category was home building, where firms showed a sharp expansion in activity for the fourth month running. Commercial projects also rose strongly, increasing at quickest pace for over two years, although civil engineering activity fell for the second month running, at the sharpest rate since May.

Eliot Kerr, Economist at IHS Markit, which compiles the survey said: “Following August’s slowdown, growth in UK construction activity rebounded strongly in September.

“There were faster increases in activity in both the housing and commercial sub-sectors, which more than offset a sharper decline in civil engineering work. Forward-looking indicators point to a sustained rise in activity, with new work increasing at the quickest pace since before the lockdown and sentiment towards the 12-month outlook at its strongest for seven months.

“Meanwhile, latest PMI data pointed to another fall in employment numbers across the UK construction sector. That said, the rate of job shedding eased substantially, while building firms upped their purchasing activity in a further sign of encouragement for the months ahead.”

Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply said: “UK Construction took off in September, soaring ahead of both the manufacturing and service sectors in terms of output growth and recording the fastest rise in purchasing activity since October 2015.

“Of the three monitored sub-sectors, house building was the strongest performer, with activity increasing for the second month in a row, partially driven by residential-related services such as home improvements.

“However, civil engineering took another backwards step and progress worsened significantly as bigger construction developments stayed in suspended animation.

“Government support schemes are winding down, so the bigger worry remains levels of job creation.

“With another drop in employment numbers, vacancies were sparse and further redundancy schemes could be on the cards once this pent-up demand for work is satisfied.

“But for now, builders are stocking up for Brexit and Covid preparations, so purchasing remains strong in spite of longer delivery times and some shortages.

“Optimism is at a seven-month high, so builders are enjoying this resurgence in activity following the summer lows.”

 

About Fiona Russell-Horne

Fiona Russell-Horne
Group Managing Editor across the BMJ portfolio.

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