Lockdown and port issues push construction sector to first loss since June

The UK’s construction sector contracted in January, breaking a seven-month streak of consecutive growth, as a third national lockdown and delays at ports hit builders.

The sector scored 49.2 on the IHS Markit/CIPS construction purchasing managers’ index (PMI), which is closely tracked by experts.

It is a reduction from 54.6 in December and below 50, signalling that the sector had shrunk.

After months of growth, building firms had begun hiring for the first time in 21 months in December as housebuilding ramped up and halted projects were restarted.

Around 45% of the companies surveyed reported that lead times had increased when they wanted materials delivered, while only 1% said the time had dropped.

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The upswing was interrupted in January and the gains were unwound, said Duncan Brock, group director at the Chartered Institute of Procurement & Supply, which helps compile the survey.

“Clients hesitated to commit to new workflows because of concerns around the vitality of the UK economy, which in turn brought cautious job hiring and obliterated the gains made in employment numbers in December,” he said.

“The residential sector had been relatively immune to the effects of lockdowns and pandemic disruptions but it too was beginning to show signs of weakness for the first time in over six months.”

It means the sector broke a winning streak it had been on since June, after only being forced to shut down for a short period early in the pandemic.

Housebuilders had been boosted by the Government’s holiday on stamp duty for homes worth less than £500,000. This perk is set to come to an end on March 31.

Max Jones, director with Lloyds Bank’s infrastructure and construction team, said the figures show builders are still upbeat about the coming year, despite some “teething problems” caused by the UK’s new relationship with the EU.

He added: “Perhaps more than ever it feels like the fortunes of the largest contractors are reliant on Government pressing go on infrastructure projects designed to help ‘level up’ the economy and bolster Britain’s green credentials.

“In that sense construction bosses will be watching next month’s Budget closely in the hope that the Chancellor announces a raft of shovel-ready schemes.”

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