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Wed August 10 2022

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Construction activity grows for first time in over two years

6 Apr 10 UK construction activity increased during March for the first time since February 2008.

UK construction activity increased during March for the first time since February 2008.

The seasonally adjusted Construction Purchasing Managers’ Index, provided by the Chartered Institute of Purchasing and Supply and Markit, posted 53.1, rising from the previous month’s reading of 48.5. Growth of the sector principally reflected a rise in new orders.

Of the three broad UK construction subsectors, house-building showed the strongest rise in activity, which was the seventh in successive months.

In addition to residential construction, commercial-based activity also increased during March, with growth reported for the first time since February 2008.

The civil engineering sub-sector, where activity is typically driven by public spending, remained in decline during March. Moreover, the pace of contraction was marked.

Incoming new orders increased during March for the first time in four months, and only the second time since February 2008. Reports from builders attributed the rise in new business to the increased success of tenders, said CIPS. However, there were reports that opportunities to tender remained low when compared to pre-recession levels.

A further sharp decline in employment within the UK construction sector during March highlighted some fragility in the current upturn. Job cuts were largely attributed to redundancy programmes, with staffing levels showing no signs of stabilisation despite the rises in activity and new orders.

The use of sub-contractors by UK construction companies also continued to fall. Availability of sub-contractors subsequently increased further, while their rates were reduced for a 19th consecutive month.

As activity grew, input purchases increased. The rise in purchasing activity was only marginal, although was the first in twenty-five months. Subsequently, suppliers’ delivery times lengthened, as vendors had insufficient operating capacity to accommodate increased demand for purchases. There were also reported shortages of certain items.

Input prices faced by UK construction companies rose in March for the fifth month out of the last six. This was attributed to a further increase in raw material prices. Moreover, the rate of input cost inflation was at its strongest since September 2009.

David Noble, chief executive ffficer at CIPS, said: “Though it’s great to see the UK construction sector turn the corner after two years of relentless contraction, it’s still very early days. The recession hit construction the hardest and because the industry is operating from such a low base, this upturn may be short-lived.

“Purchasing managers noted an emerging public/private sector divide as the General Election looms closer. While overall industry improvement was bolstered by private sector expenditure - especially in the housing and commercial sectors - it’s worrying to see civil engineering contracting, given that mooted public sector spending cuts are yet to kick in.

“Dwindling head counts, as firms laid off staff at a quicker pace, coupled with weakened confidence about future business performance, suggests that the construction industry still has some concerns over the stability of the recovery.”

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