Thursday 4 February 2021 10:04 am

UK PMIs: Construction activity contracts for the first time since May

Construction output declined for the first time in eight months in January as lockdown measures and near-term economic concerns led to hesitancy among clients.

The IHS Markit/Cips purchasing managers (PMI) index for construction scored 49.2 in January, with any score below the 50-mark indicating contraction.

The reading was a sharp drop from December, when a score of 54.6 was recorded, and was far lower than analysts 52.9 forecast.

It brings a seven-month period of expansion to an end, after a downturn in commercial activity and a loss of momentum in the house building recovery.

Construction remains one of only a few sectors still operating during lockdown.

Read more: Property chiefs: Lockdown and end of stamp duty holiday push down house prices

Reaction

Despite the drop, Brendan Sharkey, head of construction and real estate at MHA MacIntyre Hudson, believes the sector has dodged the Brexit bullet.

Sharkey said: “The outlook for the construction sector in the short term is fairly mixed.

“Indeed, there has been no major impact from the UK’s exit from the transition arrangements with the EU on 1 January 2021 other than the sourcing of materials.

“In other areas clouds remain and there is uncertainty regarding the sector’s prospects for the year.”

Read more: London house prices drop near Tube stations as buyers shuffle priorities

Mark Robinson, group chief executive at SCAPE, agrees that the road to recovery remains uncertain, pointing towards next month’s Budget announcements as a crucial moment for contractors.

Robinson said: “Global trade and border control issues continue to test contractors in terms of material supplies whilst the ongoing impact of the new variants of Covid mean sites are facing greater challenges around absenteeism and productivity.

“All of this is naturally dampening some of the relative optimism we saw last year, and the pace at which the industry is able to drive the UK’s economic recovery.

“Despite the challenges at the start of the year, the Budget will undoubtedly help improve the sector’s outlook for 2021 and provide a timely boost for those businesses beginning to see their financial resilience tested.”

Read more: FTSE opens up higher for fourth day in a row

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