Construction sector cooled in October but house building remains strong

House building continues to prop up the UK construction world but major civil engineering projects dragged the sector down, according to new data.

Overall, the sector remained in growth in October but cooled compared with the previous month to the slowest rate in five months, the closely followed IHS Markit/CIPS construction purchasing managers’ index (PMI) said.

The index hit a reading of 53.1 last month compared to 56.8 in September. Anything above 50 is considered a sector in growth.

House building was by far the best-performing area, although it slowed slightly on September.

The sector was helped by the stamp duty holiday which runs until March next year, and from the continued pent-up demand from the national lockdown in March.

Tim Moore, economics director at IHS Markit, which compiles the survey, said: “The construction sector was a bright spot in an otherwise gloomy month for the UK economy during October.

“Another sharp rise in house building helped to keep the construction recovery on track, albeit at a slower speed than in the third quarter of 2020.

“Commercial work also contributed to growth in the construction sector, while civil engineering remained the main area of concern as activity in this category dropped for the third month running.”

He added supply chain problems remain for the sector, with longer delivery times for products and materials – leading to higher prices as demand outstripped supply.

There are also concerns that whilst the short-term outlook remains positive, there were signs last month that renewed economic uncertainty and a path to recovery are slowing business.

Duncan Brock, group director at the Chartered Institute of Procurement & Supply (CIPS), added: “Higher levels of purchasing to meet the demands of the biggest rise in new orders since December 2015 were met with roadblocks of material shortages and the highest cost inflation since April 2019.

“Supplier delivery times acted as a drag on completion as builders rushed to finish work in hand and meet new-build requests.

“The largest blot on the landscape was the number of redundancies and job shedding reported by construction firms, though builders remained relatively cheerful about the next 12 months.

“The strength of the pipeline of new work especially from a robust housing market means the sector is moving in the right direction and hopeful of getting through the winter unscathed.”