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‘Sustained rebound’ for construction in December

7 January 2021

UK construction businesses enjoyed a “sustained rebound” in December 2020, according to construction buyers.

Stronger order books helped to drive recovery in the sector, with buyers reporting that work that had been delayed earlier in 2020 as a result of the coronavirus pandemic was finally coming on stream.

The IHS Markit/CIPS UK Construction Total Activity Index posted a score of 54.6 in December (where 50 indicated no change), which was broadly flat on the score of 54.7 registered in November. It was the seventh consecutive month that the Index scored above 50.

Buyers indicated that there was another sharp rise in house building during December, while commercial activity also expanded, albeit at the slowest rate of growth since the recovery began in June 2020. Civil engineering was the weakest performing category, with activity falling for the fourth time in the past five months.

Total new orders increased at a “strong pace” in December, with buyers noting improving client demand, alongside a boost in business wins on projects that had been deferred since the start of the pandemic.

Purchasing prices increased at the steepest pace for just under two years, reflecting supply shortages and strong demand for construction inputs. Buyers often cited rising prices for timber and steel.

Half of buyers surveyed forecast a rise in business activity over the course of 2021, with only 10% anticipating a decline, which signalled the strongest optimism across the sector since April 2017.

Tim Moore, economics director at IHS Markit, which compiles the survey, said: “December data illustrated a positive end to the year for the UK construction sector, mostly fuelled by a sharp rebound in house building. Overall output growth has slowed in comparison to the catch-up phase last summer, but now it is encouraging to see the recovery driven by new projects and stronger underlying demand.

“A sustained improvement in construction order books resulted in a rise in employment numbers for the first time in nearly two years and the most optimistic growth expectations since April 2017. Construction companies are hopeful that higher demand will broaden out beyond residential projects in the next 12 months, led by infrastructure spending and a potential rebound in new commercial work from the depressed levels seen during the pandemic.”

Mark Robinson, group chief executive at public procurement body Scape, added: “Despite the latest output levels, the construction industry continues to experience challenges. Even with sites remaining open, the impact of a third national lockdown and increased social distancing measures are likely to affect the speed at which future projects are brought forward, including decisions on private investment and important urban regeneration.  

“The public sector continues to be the main vehicle for contractor growth and investment in communities, backed by increased government funding, as has been the case since sites reopened last summer. These projects remain best-placed to set the standard for the progressive and ambitious goals set out in the new Construction Playbook.”

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