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Buyers report acceleration in construction activity in September

6 October 2020

There was a sharp increase in UK construction activity in September, as companies enjoyed the sharpest rise in new business since the coronavirus lockdown in March, and the rate of job shedding in the sector started to ease.

That’s according to the latest date from the IHS Markit/CIPS UK Construction Total Activity Index, which registered a score of 56.8 last month (where any figure above 50.0 indicates growth in output). The figure was an increase on 54.6 recorded in August.

Meanwhile firms increased their purchasing activity at the quickest pace for nearly five years and sentiment towards future activity was the strongest for seven months.

The acceleration in growth was driven by the home building category. Commercial projects activity also increased at its fastest pace for two years. However, civil engineering activity fell for the second month running and at the sharpest rate since May.

New orders rose for the fourth time in as many months, with survey respondents continuing to mention a release of pent-up demand.

On the employment front, staff numbers continued to fall in September. However, the rate of workforce contraction eased to the slowest for seven months. When explaining job cuts, some panellists mentioned releasing furloughed workers following a restructuring of their operations. Meanwhile, cost burdens faced by building companies continued to rise.

Finally, confidence towards the 12-month business outlook was the strongest since February. Optimism was supported by expectations of a sustained rise in new work.

Eliot Kerr, economist at IHS Markit, which compiles the survey, said: “Following August’s slowdown, growth in UK construction activity rebounded strongly in September. There were faster increases in activity in both the housing and commercial sub-sectors, which more than offset a sharper decline in civil engineering work. “Forward-looking indicators point to a sustained rise in activity, with new work increasing at the quickest pace since before the lockdown and sentiment towards the 12-month outlook at its strongest for seven months.

“Meanwhile, latest PMI data pointed to another fall in employment numbers across the UK construction sector. That said, the rate of job shedding eased substantially, while building firms upped their purchasing activity in a further sign of encouragement for the months ahead.”

Mark Robinson, chief executive at public sector procurement authority Scape Group, said: “It promises to be a challenging winter for construction. The prevailing uncertainty around future lockdowns is likely to hinder private capital investment in the months ahead, and the onus is on the public sector to pick up the torch of industry and bring the construction sector along with it.

“Urban regeneration and civic infrastructure projects are well-placed to provide vital impetus but we can’t afford a window of inactivity. As such, it is crucial that projects move through procurement swiftly so that we can seize the opportunity to invest in the future of communities and public services through high-quality, low-carbon facilities.”

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