The higher levels of new business were mostly attributed to
the start of new projects that had been delayed earlier in the coronavirus
pandemic and continued demand for residential building work.
But the rate of growth in in output among construction
companies in October was at its lowest level since June, according to the latest
IHS Markit/CIPS UK Construction Total Activity Index for October. The index recorded
a score of 53.1 last month (where a score of 50.0 indicates no change), down
from 56.8 in September. The index has registered above the 50.0 mark in each
month since June.
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Buyers reported that house building was the best-performing
area of construction activity during October (scoring 62.4). There was also
another rise in commercial activity (52.1), although it was its weakest level
of growth for five months. By contrast, civil engineering activity dropped for
the third month running (36.4).
The rebound in construction activity after the shutdowns
seen during the initial lockdown period continued to put pressure on supply
chain capacity in October. This was signalled by another sharp lengthening of
delivery times for construction products and materials, with the latest
deterioration in supplier performance the steepest since June. Construction
firms often noted that demand for building materials had outstripped supply in
October, which resulted in higher average cost burdens. The rate of input price
inflation accelerated to its fastest since April 2019.
Nonetheless, construction companies reported optimism
towards their prospects for the next 12 months, despite concerns about the
wider economic outlook. Around 45% of the survey panel anticipate a rise in
output during the year ahead, while only 14% forecast a reduction.
Tim Moore, economics director at IHS Markit, which compiles
the survey, said: "The construction sector was a bright spot in an
otherwise gloomy month for the UK economy during October. Another sharp rise in
house building helped to keep the construction recovery on track, albeit at a
slower speed than in the third quarter of 2020. Commercial work also
contributed to growth in the construction sector, while civil engineering
remained the main area of concern as activity in this category dropped for the
third month running.
"Supply chain difficulties persisted in October, as
signalled by a sharp lengthening of delivery times for construction products
and materials. Purchasing prices increased as a result of demand outstripping
supply for construction inputs, with the rate of cost inflation hitting an
18-month high in October.
"New orders improved at the sharpest rate for nearly
five years in October, suggesting a positive near-term outlook for construction
activity. However, survey respondents commented on renewed economic uncertainty
and concerns about the sustainability of the recovery as pent up demand begins
to wane."
Commenting on the findings, Mark Robinson, Scape Group chief
executive, said: “As England enters a second lockdown, the construction
industry remains the best-placed sector to drive economic recovery. however,
the ramping up of restrictions and the political turmoil in America is likely
to further dent interest in private infrastructure investment. As such, public
sector projects must continue to be at the forefront of government thinking.
With the full weight of government spending behind it, the construction
industry stands ready to deliver transformational change across the public
estate which will not only nurture the type of placemaking needed to stimulate
the return of private capital but also the social cohesion for a better society
on the other side of the pandemic.”
