A sharp rise in house-building along with strong order books helped to drive continued recovery within the construction sector during December 2020.
That’s the good news coming out of the latest monthly survey of purchasing managers which also explains how the industry was boosted by new business wins on projects which had been deferred since the beginning of the pandemic and that, in response to higher demand, there was also a slight rise in employment numbers.
Less positively for all the buyers out there, it was reported that stretched supply chains and delays at UK ports resulted in longer delivery times, pushing purchasing prices up at a steep pace that’s not been seen for nearly two years. Also, if we take house-building out of the equation, it’s worth noting that some other areas of construction activity grew at a far slower pace (e.g. commercial activity) while others recorded a fall (e.g. civil engineering).
Offering more detail, Tim Moore, Economics Director at IHS Markit (the company behind the survey), 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 to the catch-up phase last summer, but now it is encouraging to see the recovery driven by new projects and stronger underlying demand.
“A sustained improvement in construction order books resulted in a rise in employment numbers for the first time in nearly two years and the most optimistic growth expectations since April 2017. 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.
“Transport delays and a lack of stock among suppliers were the main difficulties reported by UK construction firms at the end of 2020, which contributed to the fastest rise in purchasing prices for nearly two years.”
Giving some further thoughts on the current situation and what may lie ahead, Duncan Brock, Group Director at the Chartered Institute of Procurement and Supply, commented:
“Some positive news for the construction sector in December as the uplift from summer’s close continued through to the end of 2020 and new order levels increased for the seventh successive month. Long-term prospects came to fruition and halted projects started again as clients became more optimistic after the covid hiatus. To meet this demand head-on, builders opted for job creation for the first time in 21 months to increase previously pared-back capacity.
“Further down the line, with purchasing growth close to its highest for six years, supply chains were groaning at the seams and delivery times increased to the most dramatic extent for six months. Low availability for finished products and raw materials as a result of port disruptions added to builders’ woes as suppliers named their price for goods in acutely short supply and input price inflation increased to its highest level since April 2019.
“Once again residential building was the strongest sector and construction companies focussed on this segment seem resilient for now. As the appetite for building resources grows in the first quarter of the year however, suppliers will find it difficult to ramp up production quickly to pre-pandemic levels, so we could see even longer delivery times potentially delaying some building projects as post-Brexit disruption also remains an ever-present threat.”
The survey involved interviews with purchasing managers before the current national lockdown was announced and, in that context, 50% of those involved were forecasting that business activity would rise over the course of 2021 with only 10% expecting a decline.
News of the lockdown and potentially tougher restrictions may now have dented that optimistic mood slightly and there are undoubtedly some trickier times ahead. However, seeing 2020 end with a general trend of recovery (at least in the residential building sector) should give us all something to cheer about.
12.01.2020
Feature image: Duncan Andison/Shutterstock.com
