Housebuilding defies January gloom as overall construction activity drops

Housebuilding was the only part of the construction industry to expand in January, with output overall shrinking in the month, the first reduction in activity in seven months.

According to the latest CIPS/IHS Markit purchasing managers’ index (PMI) there was a marginal decline in UK construction activity, as well as a slowdown in new orders growth, which fell to its weakest since June 2020.

The index figure of 49.2, down from 54.6 in December, was marginally below the 50 score which represents no change in activity - everything above 50 equates to an increase.

The increase in the housebuilding sector, which registered an index score of 57.1 was the slowest since the rebound began in June 2020. In December it posted an index figure of 61.9.

The renewed fall in commercial activity, which fell to 46.2 from 51.2, and another drop in work on civil engineering projects, from 48.0 to 45.0, stood in contrast with strong growth in the residential category, 57.1.

The report said construction companies surveyed often noted that the third national lockdown and concerns about the near-term economic outlook had led to greater hesitancy among clients, especially for new commercial projects.

There were also reports of a “severe” downturn in material supplier performance in January due to transport shortages and delays.

According to the report, around 45% of the survey panel reported longer lead times for the delivery of construction inputs, while only 1% noted an improvement.

Mark Robinson, group chief executive at Scape, said: “Global trade and border control issues continue to test contractors in terms of material supplies while 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.”

Robinson said despite the challenges, the upcoming would help improve the sector’s outlook for 2021 and provide a boost for the businesses starting to feel the pinch financially.

The data said construction companies had continued to experience intense cost pressures, driven by rising prices for plaster, steel and timber.

The overall rate of input price inflation accelerated to its highest for just over two and-a-half years.