A steep rise in homebuilding has led a strong upturn on construction activity at the end of the third quarter, with firms increasing their purchasing at the quickest pace for nearly five years, according to the latest IHS Markit report.
The headline seasonally adjusted IHS Markit/CIPS UK Construction Total Activity Index registered 56.8 in September, up from 54.6 in August (Any figure above 50.0 indicates growth of total construction output). The latest reading pointed to a reacceleration in the rate of activity growth and a sharp increase overall.
The strongest performing category was home building, where firms registered a sharp expansion in activity for the fourth month running. Work undertaken on commercial projects also rose strongly, increasing at quickest pace for over two years. Meanwhile, civil engineering activity fell for the second month running and at the sharpest rate since May.
In line with the rise in new work, UK construction firms recorded another marked increase in purchasing activity at the end of third quarter. Moreover, the rate of growth accelerated to the fastest since October 2015.
On the employment front, staff numbers continued to fall in September. However, the rate of workforce contraction eased to the slowest for seven months. When explaining job cuts, some panellists mentioned releasing furloughed workers following a restructuring of their operations.
Meanwhile, cost burdens faced by building companies continued to rise. That said, the rate of inflation eased for the first time in six months to the weakest since May. Panellists often noted higher raw material prices amid shortages at suppliers, with data indicating another sharp deterioration in vendor performance.
Finally, confidence towards the 12-month business outlook was the strongest since February, supported by expectations of a sustained rise in new work.
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. Fuelled by the easing of lockdown measures, new orders rose for the fourth month in a row and at the quickest pace since the beginning of the year before the pandemic struck.”
He continued: “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.”
