Building activity rose last month at the fastest pace in six and a half years as workloads increased and stalled projects were restarted.
The March purchasing managers’ index for construction easily beat expectations, jumping to 61.7 from 53.3 in February, its highest reading since September 2014 and above forecasts for 54.6. Readings above 50 indicate growth.
Every sector of the industry enjoyed robust growth. Duncan Brock, director at the Chartered Institute of Procurement & Supply, which jointly compiles the survey, described the readings as spectacular.
Housebuilding has enjoyed rapid growth on the back of the property boom and it continued to be the best performing construction sector, with a reading of 64. The relative weakness in civil engineering and commercial development disappeared last month.
Activity in both commercial projects, such as offices and shop and restaurant refits, and for bigger civil engineering projects accelerated at its fastest pace since 2014. Commercial activity is likely to have been lifted as businesses prepared for the reopening of pubs and retailers next week.
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Tim Moore, economics director at IHS Markit, which compiles the PMIs, said: “The increasingly optimistic UK economic outlook has created a halo effect on construction demand and the perceived viability of new projects.”
Respondents to the PMI survey revealed a rush for recruitment and a buoyant outlook. Job creation rose at the fastest pace since December 2018 and growth projections were the most upbeat since June 2015, “reflecting confidence in the UK economic outlook, the improving pandemic situation and pent-up demand”.
Companies reported new work from big infrastructure projects as well as greater spending on residential construction and rising new home sales, IHS said. Client demand has improved and “contract awards on projects that had been put on hold contributed to a steep upturn in new orders”.
The rise in activity is filtering through the supply chain, with construction outfits signalling a sharp increase in purchasing volumes in response to greater workloads.
However, the surge in activity, combined with logistical problems caused by Brexit and the coronavirus, created bottlenecks that drove up prices at the fastest rate in 13 years.
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“Imbalanced demand and supply led to the steepest increase in purchasing prices since August 2008. Survey respondents widely noted that suppliers had cited Brexit and Covid-19 as reasons for price hikes in March,” the survey found.
Brock said: “Construction was full of the joys of spring in March with a sudden leap into solid growth fuelled by rises in workloads in all sectors.
“The unfortunate spanner in the works comes in the form of the steepest inflationary rise in raw materials and other construction items since August 2008 at the height of the last commodity price cycle. Supply chains are still underperforming and almost half of the survey respondents said they had experienced longer delays and higher costs. If this continues, it could easily cool the sector down a notch.”
