Construction activity in the UK rose at its fastest pace in almost seven years last month, boosted by a record increase in new orders as lockdown restrictions eased across the country.
According to IHS Market’s monthly construction purchasing managers index (PMI), the sector jumped to 64.2 in May from 61.6 the previous month, its highest level since September 2014. This beat expectations of a reading of 62.3.
Any score of above 50 indicates growth. The data were collected between 12 and 27 May.
The survey showed that the housebuilding sector was the best-performing category of construction activity, reflecting a boom in the housing market, with house prices rising in Britain by more than 10% in annual terms.
The latest increase in work on commercial projects was the steepest since August 2007, reflecting strong demand conditions following the reopening of customer-facing areas of the UK economy.
Civil engineering activity also increased sharply during May, although the pace of expansion eased slightly since the previous month.
The PMI's gauge of new orders rose to its highest level since the survey started in 1997. Around 47% of the survey panel reported higher volumes of new work, while only 11% signalled a reduction.
Meanwhile, employment growth in construction companies was the highest since mid-2014, the survey showed.
Input cost inflation was also at a survey-record high during May, reflecting a surge in demand for construction materials and severe supply shortages.
However, construction companies remain highly upbeat about their growth prospects for the next 12 months. Around 61% of the survey panel predict a rise in business activity, while just 8% anticipate a decline.
Tim Moore, economics director at IHS Markit, which compiles the survey, said: “There were widespread reports citing shortages of construction materials and wait times from suppliers lengthened considerably in comparison to those seen during April.
“Imbalanced supply and demand led to survey record increases in both purchasing prices and rates charged by sub-contractors. Despite severe challenges with materials availability, construction firms remain highly upbeat about their near-term growth prospects.”
Eurozone construction activity also continued to expand, rising slightly from 50.1 in April to 50.3 in May, a third consecutive expansion in activity. Although it was a marginal increase, the rate of growth was the quickest recorded since February 2020.
“Despite another month of strong growth, the construction industry cannot afford to become complacent as it approaches peak building season amid a concerning rise in material costs,” Mark Robinson, group chief executive at SCAPE, said.
“As the wider economic recovery continues to accelerate, it is at this point – with material shortages driving record levels of inflation – that project timetables and the stability of contractors may be affected.
“With trade barriers unlikely to be removed in the second half of the year, attention will need to turn to careful project and cost management to ensure that supply chains remain resilient, new schemes start as planned and the recovery continues at pace.”
It comes after data showed on Thursday that the UK service sector grew at its fastest pace in 24 years last month as the hospitality and retail sector continued to enjoy the lifting of COVID restrictions across the country.
The services sector rose to 62.9 in May, from 61.0 in April, beating market expectations of 61.8, highlighting how the UK economy is recovering from the health crisis.
It was driven by resurgent business and consumer spending, leading to the strongest rate of employment growth for just over six years as business brought workers back from furlough and hired new staff.
Survey respondents mostly cited better-than-expected client demand, but there were many reports suggesting difficulties with staff availability, especially among consumer service providers.
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