UK construction returns to growth as confidence builds

The UK construction industry returned to growth in February as an increase in commercial building helped offset a slowdown in housing, a survey showed.

The IHS Markit/CIPS purchasing managers' index was 53.3 in February, up from 49.2% in February with 50 marking the difference between growth and shrinkage. The reading beat analysts' average forecast of 51.

February's result showed the sector recovering after January's dip which was the only decline in the past eight months. New orders also regained momentum as confidence rose in anticipation of improving UK economic conditions.

Residential work remained the strongest part of the industry but the pace of recovery eased slightly. This was more than offset by a sharp rise in commercial work and a slower decline in civil engineering.

Tim Moore, IHS Markit's economics director, said: "Construction work regained its position as the fastest growing major category of UK private sector output in February. The rebound was supported by the largest rise in commercial development activity since last September as the successful vaccine rollout spurred contract awards on projects that had been delayed at an earlier stage of the pandemic."

Supply chains remained bogged down as vendors struggled with transport delays and rising demand. Stretched global supply chains, higher shipping charges and rising commodity prices went towards the sharpest increase in average costs in the sector since 2008.

Companies recruited more workers to meet demand and purchases of materials picked up as builders prepared for new projects to start. Optimism reached a five-year high with Covid-19 vaccines promising a release of pent-up demand and order books improving.

Moore said: "Reports of delivery delays remain more widespread than at any time in the 20 years prior to the pandemic, reflecting a mixture of strong global demand for raw materials and shortages of international shipping availability. Subsequently, an imbalance of demand and supply contributed to the fastest increase in purchasing costs across the construction sector since August 2008."