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Buyers signal construction output dip amid third lockdown

Image: Dreamstime/Jose Alberto Barco Figari

Construction buyers reported a “marginal” decline in output during January, signalling the end of a seven-month period of expansion.

The latest survey of buyers, as part of the IHS/Markit CIPS UK Construction Total Activity Index, also showed new orders at their weakest level since June 2020, with construction companies noting that concerns about the third national lockdown and the near-term economic outlook had lead to “greater hesitancy” among clients, especially for new commercial projects.

Transport shortages and delays at UK ports also resulted in a drop in supplier performance, with 45% of the survey panel reporting longer lead times for the delivery of materials.

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The headline seasonally adjusted Construction Total Activity Index stood at 49.2 in January (where a score of 50 indicates no change), down from 54.6 in December.

The commercial activity index stood at 46.2, while civil engineering activity also dropped to 45. However, residential construction continued to perform strongly, at 57.1.

Meanwhile, survey respondents also noted “intense” cost pressures, driven by rising prices for plaster, steel and timber.

Tim Moore, economics director at IHS Markit, which compiles the survey, said: "The construction sector ended a seven-month run of expansion in January as a renewed slide in commercial work dragged down overall output volumes. House building was the only major construction segment to register growth, but momentum slowed considerably in comparison to the second half of last year.

"Construction companies continued to report major delays with receiving imported products and materials from suppliers, with congestion at UK ports contributing to the sharpest lengthening of delivery times since May 2020. Adding to the squeeze on the construction sector, rising steel and timber costs led to the fastest rate of input price inflation for just over two-and-a-half years.

"The latest survey highlighted that construction companies have become more cautious about the business outlook. Output rebounded quickly after stoppages on site at the start of the pandemic, but hesitancy among clients in January and worries about near-term economic conditions resulted in a dip in growth expectations for the first time in six months."