Construction recovery continues in December
Positive end to 2020 with sustained rebound in construction sector business activity led by house building
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.
The headline seasonally adjusted IHS Markit/CIPS UK Construction Total Activity Index posted 54.6 in December, little-changed from 54.7 in November and above the crucial 50.0 no-change threshold for the seventh consecutive month.
Increased construction activity primarily reflected another sharp rise in house building during December (index at 61.9). Commercial activity also expanded (51.2), but the rate of growth eased to its lowest since the recovery began last June. Civil engineering was the weakest-performing category (48.0), 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.
Exactly half of the survey panel (50%) forecast a rise in business activity over the course of 2021, while only 10% anticipate a decline, which signalled the strongest optimism across the construction sector since April 2017.
Tim Moore, economics director at IHS Markit, said: ‘December data illustrated a positive end to the year for the UK construction sector, mostly fuelled by a sharp rebound in house building. Overall output growth has slowed in comparison with the catch-up phase last summer, but now it is encouraging to see the recovery driven by new projects and stronger underlying demand.
‘Construction companies are hopeful that higher demand will broaden out beyond residential projects in the next 12 months, led by infrastructure spending and a potential rebound in new commercial work from the depressed levels seen during the pandemic.’