UK construction output slips in January

Survey reveals renewed downturn in commercial activity as house building recovery loses momentum

JANUARY PMI data compiled by IHS Markit indicated a slight decline in UK construction output, ending a seven-month period of expansion. The latest survey also signalled a slowdown in new order growth to its weakest since June 2020.

At 49.2 in January, down from 54.6 in December, the headline seasonally adjusted IHS Markit/CIPS UK Construction Total Activity Index signalled a decline in overall construction output for the first time since May 2020. However, the rate of contraction was only marginal.

A renewed fall in commercial activity (index at 46.2) and another drop in work on civil engineering projects (45.0) stood in contrast with strong growth in the residential category (57.1). Even so, the latest increase in house building was the slowest since the rebound began in June 2020.

New business volumes rose slightly in January, but the rate of expansion lost considerable momentum since the end of 2020. Survey respondents mostly commented on delayed projects in the commercial segment due to the impact of the pandemic, while some also cited less favourable demand conditions for residential work.

Nevertheless, business expectations for the year ahead remained positive in January, although the degree of confidence eased to a three-month low.

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 with the second half of last year.

‘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.’

Duncan Brock, group director at the Chartered Institute of Procurement & Supply, added: ‘Builders were feeling the pressure in January as new order growth across the sector fell sharply to the slowest expansion rate since June last year and the commercial sector, in particular, acted as a brake to sustained recovery.’

He added that event the residential sector, which had been relatively immune to the effects of lockdowns and pandemic disruptions, was also beginning to show signs of weakness for the