Construction activity rises at softest pace since February

Softer expansion seen house building, commercial work, civil engineering, and new order growth

UK construction companies signalled a further increase in output volumes during August, however the pace of growth eased notably from the previous survey period. There were softer expansions across house building, commercial work, and civil engineering activity as well as in new order growth.

Moreover, companies widely noted sustained, and severe, supply chain disruption in August, which contributed to an accelerated rise in input prices, and one that was the second sharpest in the history of the survey.

The headline seasonally adjusted IHS Markit/CIPS UK Construction PMI Total Activity Index posted 55.2 in August, down from 58.7 in July, indicating activity has expanded in each of the last seven months. That said, the rate of increase eased to the softest since February as restricted supply of materials and transport began to weigh on overall construction activity.

Commercial work (index at 56.0) was the best performing broad category of construction output in August, though the rate of expansion eased to the slowest for six months. This was followed closely by house building (55.0), while civil engineering remained the slowest growing subsector (54.8) for the fourth month in a row.

Total new work increased for the fifteenth consecutive month in August. While the latest improvement in order books was marked overall, the rate of growth softened to the weakest since March. Businesses noted a continued resumption of projects that had been delayed due to Brexit and the COVID-19 pandemic, though client confidence was dampened by volatility in raw material supplies and increased cost burdens.

Looking ahead, however, construction companies remained highly upbeat about their growth prospects over the coming 12 months. Positive sentiment was underpinned by hopes of an expected rise in new contract awards across all subsectors of construction.

Usamah Bhatti, economist at IHS Markit, who compile the survey, said: ‘Evidence that the UK construction sector began to feel the impact of ongoing supply chain disruption was widespread midway through the third quarter of 2021. Growth rates for overall activity as well as the three monitored subsectors eased further from the recent highs earlier in the summer. Similarly, new business inflows have continued to increase at a marked pace, yet even here the rate of growth has eased to a five-month low.’