The IHS Markit/CIPS UK Construction Total Activity Index
reported a strong expansion of business activity last month, recording a score
of 58.1 (where 50.0 indicates no change).
That was up from 55.3 in June, as the construction industry
continued its return to work following the coronavirus lockdown.
The main driver of activity in July was residential
building, with activity increasing to the greatest extent since September 2014
as buyers reported the release of pent-up demand and reduced anxiety among
clients.
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Commercial work and civil engineering both also expanded at
slightly quicker rates than in June, with the growth often attributed to the
catch-up of work that had been delayed, according to respondents.
Meanwhile, the survey found that new orders rose at their
fastest rate since February, although the rate of expansion remained softer
than that recorded for output levels.
And construction firms were optimistic overall about the
prospect of a recovery in business activity during the next 12 months. Around
43% of the survey period expected a rise in output over the coming year, while
only 30% forecast a fall.
Nonetheless, the rate at which companies shed jobs
increased, with one in three respondents (34%) reporting a fall in employment.
Input cost inflation reached its highest level since May
2019, with pressure on costs partly linked to stretched supply chains.
Tim Moore, economics director at IHS Markit, which compiles
the survey said: “Construction companies took another stride along the path to
recovery in July as a rebound in house building helped to deliver the strongest
overall growth across the sector for nearly five years. Civil engineering and
commercial activity are also back in expansion, which has been mainly due to
the restart of work that had been delayed during the second quarter of 2020.
"Survey respondents noted a boost to sales from easing
lockdown measures across the UK economy and reduced anxiety about starting new
projects. However, new work was still relatively thin on the ground, especially
outside of residential work, with order book growth much weaker than the
rebound in construction output volumes.
"Concerns about the pipeline of new work across the
construction sector and intense pressure on margins go a long way to explain
the sharp and accelerated fall in employment numbers reported during July. This
shortfall of demand was mirrored by the fastest rise in sub-contractor
availability since November 2010 and another decline in hourly rates
charged."
