The near five-year high in construction output post-lockdown showed signs of slowing last month, according to the latest IHS Markit survey of purchasing managers, with respondents mostly pointing to a lack of new work to replace completed contracts.
Higher levels of activity have been recorded in each of the past three months, but the latest expansion was the weakest over this period. The headline seasonally adjusted IHS Markit/CIPS UK Construction Total Activity Index registered 54.6 in August, down from 58.1 in July, where any figure above 50.0 indicates growth of total construction output.
House building registered the strongest rebound since the stoppages of work on site in late-March due to the 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.
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 best performing 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 grow
