Construction sector returns to growth as vaccine optimism grows

The UK construction sector returned to solid growth in February, having gone into reverse in January due to port delays and the introduction of a third national lockdown.

The closely-followed IHS Markit/CIPS Purchasing Managers Index for February came in at 53.3 compared with 49.2 in January – with anything above 50 seen as a sector in growth.

Respondents to the survey said new orders and projects have been launched as optimism for the economy improving took hold.

Lead times for products continued to cause problems, however, as vendors struggled with transport delays and an increase in demand.

Higher shipping charges and rising prices for raw materials also impacted the sector, leading to the sharpest increase in average costs across the construction sector since August 2008.

Residential work remained the strongest area of growth in February, although managers said this slowed slightly on a month earlier, in part due to snow hitting much of the country and slowing down builders.

The cost of timber also had an impact, respondents reported.

In commercial work there was the sharpest rise since last September as projects that had been delayed earlier in the pandemic started to get under way, and there was a reported boost in infrastructure work on major transport projects.

As a result of the increase in work and new projects starting, job creation in the sector increased at its fastest rate since March 2019. Optimism was also at a five-year high over the belief that the vaccine rollout will release pent-up demand.

Tim Moore, economics director at IHS Markit, which compiles the survey, said: “House building is still the engine of recovery for the construction sector, although there was a loss of momentum since January as adverse weather and longer wait times for materials contributed to some temporary delays on site.

Latest research from CIPS – The Chartered Institute of Procurement & Supply cost pressures for manufacturers have increased due to supply chain disruptions and raw material costs.https://t.co/sXEu9qom0s#SupplyChain #SmartManufacturing #COVID19 #Cost

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“Stretched supply chains and sharply rising transport costs were the main areas of concern for construction companies in February.

“Reports of delivery delays remain more widespread than at any time in the 20 years prior to the pandemic, reflecting a mixture of strong global demand for raw materials and shortages of international shipping availability.”

Duncan Brock, group director at the Chartered Institute of Procurement & Supply (CIPS), added: “On the one hand, February saw a welcome rise in overall output in the construction sector as commercial projects in particular were woken from their slumber and purchasing levels rose across the board for the ninth month in a row.

“On the other hand, strong demand for products added pressure to already impaired supply chains as sellers battled with raw material shortages, and the costs of business rose at the fastest rate since August 2008.”