Friday 7 May 2021 9:51 am

Construction activity continues pacey growth but inflation fears loom

UK construction activity continued its rapid growth in April, but the burst of activity saw the rate of input cost inflation rise to its highest levels since 1997.

IHS Markit’s construction Purchasing Managers Index registered 61.6 last month, only fractionally below March’s record reading of 61.7. Any figure above 50.0 indicates an overall expansion of construction output.

Once again commercial construction work led the way, but the civil engineering sector was the most notable grower, showing its fastest increase in output since 2014.

Construction companies often cited increased levels of work on major infrastructure programmes, including contract awards from HS2 and Highways England.

Housebuilding also continued to rise, but at a slightly slower pace than in March.

However, as many economists had predicted, the sudden burst of demand has led to a rapid jump in prices in some sectors, leading to fears of growing inflation.

Higher prices paid for a wide range of construction items contributed to the fastest overall rate of cost inflation since the survey began in April 1997 (index at 84.6, up from 77.8 in March).

Steel, timber and transportation were among the most commonly reported items up in price, IHS Markit said.

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Imbalances in the supply of materials for construction also led to delivery times being extended for firms.

Duncan Brock, group director at the Chartered Institute of Procurement & Supply: “The building blocks were in place in April as builders confirmed more work, more job opportunities and strong
optimism for the next 12 months.

“The overall growth rate of new business strengthened to the fastest since September 2014 as all three sectors improved and civil engineering, the laggard of last year gained the most momentum.”

Mark Robinson, group chief executive at SCAPE, the UK’s leading public sector procurement authority, said: “Despite the outlying risk posed by continued materials and skills shortages, the sustained output growth we’ve seen since January cements the construction industry’s position at the heart of the economic recovery.

“With confidence levels on the rise, it’s important that contractors maintain this momentum and use the sustained levels of investment from central government as a catalyst for positive change. Our recent consumer research indicates that the general public wholeheartedly endorse investment in construction projects that create social value.

“The pandemic has accelerated trends towards more conscientious, community-focused development and contractors who are most aligned to these values – particularly those supporting public sector contracts – will ultimately be best-placed to respond to this call in the months ahead.”

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