The construction industry is continuing to resist the shock of the pandemic and position itself at the forefront of the post-Covid recovery, with the latest monthly PMI figures revealing that construction output expanded at its sharpest pace since September 2014.

The bell-weather industry survey found that recovery in UK construction output gained considerable momentum in March, supported by robust rises in house building, commercial work and civil engineering – a combination that saw industry confidence and optimism at its highest since June 2015.

Adjusted for seasonal influences, the IHS Markit/CIPS UK Construction Total Activity Index registered 61.7 in March, up sharply from 53.3 in February. The latest reading signalled the strongest rate of construction output growth since September 2014.

Housebuilding (index at 64.0) was the best-performing category, with growth the fastest since July 2020. Strong increases in activity were also seen in commercial construction (62.7) and civil engineering (58.0) in March, with the index readings for both segments the highest since the second half of 2014.

Survey respondents often commented on the mobilisation of delayed projects, especially in areas such as hospitality, leisure, and office development.

There were again reports of a boost from major infrastructure projects in March, as well as higher workloads due to greater spending on residential construction work and rising new home sales.

Improving client demand and contract awards on projects that had been put on hold earlier in the pandemic contributed to a steep upturn in new orders during March. Moreover, the rate of expansion accelerated to its fastest since September 2014.

Forthcoming new project starts spurred a solid rise in employment numbers, with the rate of job creation the strongest for over two years in March. Construction companies also signalled a sharp increase in purchasing volumes in response to greater workloads.

The latest upturn in input buying was the steepest since November 2020. Higher demand for construction products and materials contributed to longer wait times for deliveries by suppliers. Around 41% of the survey panel reported longer delivery times from suppliers in March, while only 1% saw an improvement. 

Supply constraints and logistics issues were commonly reported by construction companies, especially for imported items. Imbalanced demand and supply for construction inputs 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.

Meanwhile, the latest survey indicated a strong degree of confidence towards the year ahead outlook for construction activity. Growth projections were the most upbeat since June 2015, reflecting confidence in the UK economic outlook, the improving pandemic situation and pent up demand.

Tim Moore, economics director at IHS Markit, which compiles the survey, said: "The increasingly optimistic UK economic outlook has created a halo effect on construction demand and the perceived viability of new projects. Continued pressures on supply chains are expected in the near-term, but these concerns did little to dampen confidence about the business outlook. The latest survey pointed to the strongest growth projections across the UK construction sector since those reported during a post-election bounce back in June 2015."

Duncan Brock, group director at the Chartered Institute of Procurement & Supply, said: "Construction was full of the joys of spring in March with a sudden leap into solid growth fuelled by across the board rises in workloads in all sectors. The commercial pipeline was particularly spectacular giving its best performance since late-2014. This upturn led to a significant boost in hiring levels with the fastest upturn in job creation since December 2018 offering a clear sign that companies are feeling more positive in planning for new builds and refurbishments of current properties.”

Hannah Vickers, chief executive of the Association for Consultancy and Engineering (ACE), said: “While a lot of road remains to be run, we are in a far better position than this time last year. The positive progress on vaccinations means we will eventually see a reopening of the economy which will no doubt have a knock-on effect on construction as market confidence returns and businesses and people start to spend again.

“However, the challenge, I think, will be ensuring that this progress is as smooth as possible as far as vaccinations, skills and the supply chain is concerned, and that we avoid a stop-start recovery wherever possible – confidence for businesses to invest and recruit for the long term is key.”

Mark Robinson, group chief executive at public sector procurement specialists SCAPE, welcomed the news and said: “The construction industry continues to resist the shock of the pandemic in an impressive fashion and position itself at the forefront of the economic fightback. The sustained output growth recorded in March is a far cry from the record-low levels reported this time last year, reaffirming just how far the industry has come since the first lockdown.

“As the UK progresses out of lockdown, it’s critical now that we build on the lessons learned over the past 12 months. Backed by the Construction Playbook, every project must contribute towards a better future and add positive value to the local community. To that end, it’s encouraging to see the government committing to a new inquiry to shape and accelerate the industry’s net-zero capabilities, as it looks to truly build back better.”

Max Jones, director in Lloyds Bank’s infrastructure and construction team, said: “Confidence is high among contractors. Little wonder, with infrastructure work boosting order books and enabling firms to plan ahead. Many are using the safety of government-led pipelines to invest in adapting their ways of working to be more sustainable and reduce on-site waste, which will stand them in good stead for the future.

“The full effects of the pandemic will likely not hit until later in the year when government support measures are withdrawn, but those in the industry feel well-placed to weather the storm. In the longer-term contractors will be embracing modern methods of construction. While driven by the need to improve safety and accountability in the industry, it will also create more efficient, productive and technology-focused businesses that treat each project uniquely rather than with a cookie-cutter approach.”

Dave Sheridan, executive chairman at government-backed modular housebuilder ilke Homes, said: “It’s great to see construction, and more specifically housebuilding, once again leading on the UK’s economic response to Covid-19. Greater economic activity in the sector has translated into job creation levels accelerating to a 27-month high. This will be hugely encouraging for the government, with ministers continuing to ramp up the narrative on how construction projects - especially those with high sustainability credentials - can forge a path out of the current crisis for the economy by creating high-skilled, green jobs.”

PMI March data was collected between 12-30 March 2021.