British construction activity expands in April as raw material prices rise

·Contributor
·2 min read
Workers prepare the moulds for the concrete tunnel headwall in one of the two pre-cast factories built at the HS2 construction site in Chiltern, Buckinghamshire, ahead of tunnelling to start in 2021. (Photo by Steve Parsons/PA Images via Getty Images)
HS2 construction site in Chiltern, Buckinghamshire. Construction companies cited increased levels of work on major infrastructure programmes, including contract awards from HS2 and Highways England. Photo: Steve Parsons/PA Images via Getty Images

The UK saw a strong increase in construction output last month despite costs rising at the fastest pace since the survey began in 1997.

The expansion almost matched a six-year record set in March, as the reopening of the British economy and the lifting of restrictions boosted new orders.

However, the IHS Markit/ CIPS construction Purchasing Managers' Index (PMI) came in slightly below expectations, easing to 61.6 in April from 61.7 in March. Economists had pointed to a reading of 62.3.

Any figure above 50 indicates an overall expansion of construction output. The index has posted in growth territory in ten of the past eleven months, with January 2021 being the exception.

The reading came in slightly below expectations, easing to 61.6 in April from 61.7 in March. Chart: IHS Markit, CIPS
The reading came in slightly below expectations, easing to 61.6 in April from 61.7 in March. Chart: IHS Markit, CIPS

The data showed that new orders rose to their highest level since September 2014, boosted by demand for commercial work and housebuilding, as well as civil engineering which was the laggard of last year.

This led to the steepest rate of job creation across the sector since December 2015 as firms looked to hire more workers. Construction companies cited increased levels of work on major infrastructure programmes, including contract awards from HS2 and Highways England.

But shortages of construction materials, and much longer wait times for deliveries from suppliers were a sting in the tail for the sector. Aggregates, timber, steel, cement and concrete products were all widely reported as in short supply by survey respondents.

Read more: High street shoppers begin to return as restrictions ease

Construction companies mostly cited demand and supply imbalances, but some also suggested that Brexit issues had caused delays with inputs arriving from the EU.

“The UK construction sector is experiencing its strongest growth phase for six-and-a-half years, with the recovery now evenly balanced across the house building, commercial and civil engineering categories,” said Tim Moore, economics director at data company IHS Markit, which compiled the survey.

Meanwhile, Duncan Brock, Group Director at the Chartered Institute of Procurement and Supply, said: “The building blocks were in place in April as builders confirmed more work, more job opportunities and strong optimism for the next 12 months.

It comes after the UK services sector had its fastest growth in more than seven years in April.

Companies reported that they saw a sharp increase in business and consumer spending last month. New projects and forward bookings also jumped, with new order volumes rising at their fastest rate since December 2013.

Watch: Bank of England forecasts strong COVID recovery with biggest economic bounce back since WWII

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