UK
construction companies signalled a strong increase in output volumes during April, with continued
recoveries seen in civil
engineering activity, commercial work and house building.
Workloads
were boosted by the fastest rise in overall
new orders since September 2014.
On
a less positive note, demand and supply imbalances meant that the rate of input cost inflation
picked up for the seventh month
in a row to its highest since the survey began in
April 1997.
The
headline IHS Markit/CIPS UK Construction PMI® Total Activity Index posted 61.6 in April, down
only fractionally from March's
six-and-a-half year peak of 61.7. Any figure above
50.0 indicates an overall expansion of construction output. The index has posted in growth
territory in ten of the past
eleven months, with January 2021 the exception.
Commercial
work (index at 62.2) was the best-performing broad
category of construction output in April, although the rate of expansion eased slightly since
March. Survey respondents
widely commented on a boost to client demand from
rising business confidence and the reopening of the UK economy.
Civil
engineering (index at 61.5) bucked the softer overall growth trend in April and signalled its
fastest speed of recovery
since September 2014. Construction companies often
cited increased levels of work on major infrastructure programmes, including contract awards from
HS2 and Highways England.
Meanwhile,
house building (index at 61.2) continued to rise at
a strong pace in April, but the rate of growth eased from March's recent peak (64.0). There were
widespread reports of robust
demand for residential building projects and new housing
developments.
Total
new work increased for the eleventh consecutive month
in April. Moreover, the latest improvement in order books was the strongest for just over
six-and-a-half years. This
contributed to the steepest rate of job creation across the construction sector since December
2015.
Mirroring
the trend for new business, input buying expanded at the fastest pace since September 2014. A
rapid rise in demand for
construction products and materials continued to
stretch supply chains in April.
The
latest lengthening of suppliers'
delivery times was the third-greatest since the survey
began in 1997, exceeded only by those seen during the lockdown in April and May last year.
Construction firms mostly
cited demand and supply imbalances, but some suggested
that Brexit issues had led to delays with inputs arriving
from the EU.
Higher
prices paid for a wide range of construction items contributed to the fastest overall rate of
cost inflation since the
survey began in April 1997 (index at 84.6, up from 77.8 in March). Steel, timber and transportation
were among the most commonly
reported items up in price. Looking
ahead, construction companies remained highly upbeat
about their growth prospects in April. More than half of the survey panel (57%) expect a rise in
business activity during the
next 12 months, while only 7% forecast a decline.
Tim
Moore, Economics Director at IHS Markit, which compiles
the survey: "The UK
construction sector is experiencing its strongest growth phase for six-and-a-half years, with
the recovery now evenly
balanced across the house building, commercial and
civil engineering categories.
"New
orders surged higher in April as the end of lockdown spurred contract awards on previously
delayed commercial development
projects. This added to the spike in workloads from
robust housing demand and the delivery of major infrastructure
programmes such as HS2.
"Shortages
of construction materials and much longer wait times
for deliveries from suppliers were a sting in the tail for the sector. Aggregates, timber, steel,
cement and concrete products
were all widely reported as in short supply by survey
respondents.
"Supply
and demand imbalances for construction items, alongside
higher transport costs, resulted in severe price pressures
across the board during April. The overall rate of input cost inflation reached its fastest
since data collection began 24
years ago, exceeding the previous record seen at the
top of the global commodity price cycle in 2008."
Duncan
Brock, Group Director at the Chartered Institute of Procurement & Supply: "The building blocks were in place in
April as builders confirmed
more work, more job opportunities and strong optimism
for the next 12 months."The
overall growth rate of new business strengthened to
the fastest since September 2014 as all three sectors improved and civil engineering the laggard
of last year gained the most
momentum.
"Issues
around supply chain performance acted as a drag on
capacity however as supply constraints on essential materials increased to one of the third
highest levels since 1997 when
the survey began. Brexit issues remained a factor affecting deliveries from the EU and
suppliers generally were
struggling to meet the sudden rush in demand leading to shortages of basic materials.
"This
inevitably led to the sharpest rise in cost inflation in a generation as builders scrambled to catch
up on projects but the biggest
rise in job creation since December 2015 also
followed, signalling sustainable growth in the sector this summer."
