Sharpest rise in construction output since December 2018

UK construction companies signalled a return to business activity growth during February, following a nine-month period of declining workloads.

The headline seasonally adjusted IHS Markit/CIPS UK Construction Total Activity Index also pointed to the sharpest rise in new orders since December 2015. Anecdotal evidence mainly linked the recovery to a post-election improvement in business confidence and pent-up demand for new projects.

At 52.6 in February, up from 48.4 in January, the index registered above the 50.0 no-change value for the first time since April 2019. Moreover, the latest reading signalled that the overall rate of construction output growth was the fastest for 14 months.

Survey respondents noted that improved demand had translated into higher levels of business activity in February, particularly in the housing and commercial sub-sectors. There were some reports, however, that severe weather conditions had led to delays on site and acted as a brake on growth.

Residential activity remained the best-performing construction category. Latest data signalled the strongest expansion of house building activity since July 2018.

Commercial work also returned to growth in February, with the sub-sector posting its fastest increase in business activity since November 2018. In contrast to the overall trend for construction output, civil engineering activity fell again during February. However, the rate of decline was only marginal and the least marked for 13 months.

February data pointed to a strong recovery in new order intakes across the construction sector. The increase in new work was the steepest recorded for just over four years. Survey respondents widely commented on greater tender opportunities and the release of spending that had been delayed in the run up to Brexit.

Construction firms are upbeat about their growth prospects for the next 12 months. The degree of optimism eased since January, but remained much stronger than seen in the second half of 2019.

Duncan Brock, group director at the Chartered Institute of Procurement and Supply, said: “Should there be another sudden rise in purchasing activity in March, we are likely to see more challenges in supply chains, until suppliers have a chance to catch up. Given the slowdown in the global economy and potential coronavirus impacts, the sector could struggle to maintain February’s strong performance and may experience slower progress as we head into spring.”