Construction sector recovery continues in December, led by house building

Wichelstowe housing development Swindon

UK construction companies recorded a sustained rebound in business activity during December, according to the latest PMI® data compiled by IHS Markit.

Stronger order books helped to drive the recovery across the construction sector, with survey respondents often citing work on projects that had been delayed earlier in 2020. Higher levels of demand led to a slight rise in employment numbers and greater demand for construction inputs in December.

However, stretched supply chains and delays at UK ports resulted in longer delivery times and the fastest rate of cost inflation since April 2019.

Increased construction activity primarily reflected another sharp rise in house building during December. Commercial activity also expanded but the rate of growth eased to its lowest since the recovery began last June.

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, which extended the current period of expansion to seven months.

Survey respondents noted improving client demand, alongside a boost from new business wins on construction projects that had been deferred at the start of the pandemic. Rising workloads contributed to a sharp increase in purchasing activity at the end of 2020, with the rate of expansion holding close to November’s six-year high.

Some construction companies also cited efforts to bring forward input buying due to concerns about longer lead times among suppliers. The latest downturn in vendor performance was the sharpest since June 2020 and more marked than any seen prior to the pandemic.

Purchasing prices increased at the steepest pace for just under two years, particularly in timber and steel, reflecting supply shortages and strong demand for construction supplies.

December data also indicated a return to jobs growth in the construction sector, although the rate of expansion was only marginal. Additional staff hiring reflected forthcoming new projects and improved confidence about the business outlook. Exactly half of the survey panel forecast a rise in business activity over the course of 2021, while only 10 per cent anticipate a decline, which signalled the strongest optimism across the construction sector since April 2017.