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UK construction firms note lowest expansion for fifth month

Jake Carter

November 5, 2020

UK construction companies have noted the slowest rate of expansion in output volumes for the fifth consecutive month in October, according to The IHS Markit/CIPS Purchasing Managers’ Index.

The data shows that the IHS Markit/CIPS Purchasing Managers’ Index for the construction sector fell to 53.1 in October, from 56.8 in October.

Moreover, the report has registered above the 50.0 no-change mark in each month since June.

Meanwhile, house building was recorded as the best-performing area of construction activity in October, at 62.4.

Furthermore, commercial activity was noted at 52.1 and civil engineering activity at 36.4.

Looking to the next 12 months, 45% of construction companies included within 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, 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.”

Gareth Belsham, director of Naismiths, added: “The construction industry’s recovery is resting ever more on the shoulders of Britain’s booming housebuilders.

“With infrastructure work plunging back to levels not seen since the dark days of May and commercial property construction slowing too, residential building is keeping the flame alive.

“Housebuilders are not just busy now, they are racking up orders for the future too. Order books are now fuller than at any time since the pre-Brexit December 2015, and the construction industry has successfully reset and rebooted after its dramatic, V-shaped collapse and recovery.

“With socially distant construction work able to plough on as usual during England’s second lockdown, the supply chain is now struggling to keep up with demand for building materials.
“Demand is exceeding supply for certain key materials, pushing up prices and adding to delivery times.”


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