UK construction surges as economy reopens - PMI

New orders fuelled the fastest rise in UK construction activity for 24 years but the sector faces rising costs, a survey showed.

The IHS Markit/CIPS purchasing managers' index rose to 66.3 in June from 64.2 a month earlier - the biggest rise since June 1997 - as the sector continued to emerge from the Covid-19 crisis.

The increase was led by housebuilding with a reading of 68.2 and the fastest gain since 2003. Commercial work notched up a figure of 66.9 and civil engineering scored 60.7. A reading of 50 separates expansion from contraction.

The survey showed a rapid rebound in demand for new work, especially residential and commercial projects linked to the reopening of the economy. New orders have increased for 13 months running although the rate dipped from May's survey high.

Recruitment rose to meet incoming orders and costs rose rapidly as surging demand came up against supply constraints, the survey showed. Rates charged by in-demand subcontractors rose rapidly.

Tim Moore, economics director at IHS Markit, said: "Total new orders expanded at one of the strongest rates since the summer of 2007, mostly reflecting robust demand for residential projects and a boost to commercial work from the reopening UK economy.

"Supply chains once again struggled to keep up with demand for construction products and materials, with lead times lengthening to the greatest extent since the survey began in April 1997. Survey respondents widely reported delays due to low stocks of building materials, shortages of transport capacity and long wait times for items sourced from abroad."

Construction companies stayed optimistic about business over the next 12 months but concerns about labour shortages and the sustainability of surging demand caused confidence to slip to its lowest level since January.