Growth slows, but a positive end to 2021

While construction growth eased in December, the latest PMI® data pointed to a positive end to 2021 with confidence rising for 2022.

The activity index saw solid increases in business activity across the construction sector, as the headline seasonally adjusted IHS Markit/CIPS UK Construction PMI® Total Activity Index posted 54.3, remaining above the crucial 50.0 no-change threshold.

The rate of expansion has dropped since registering at 55.5 in November, but activity remains growth and attitudes toward 2022 are still positive.

Respondents to the survey noted that the rise of the Omicron variant and subsequent restrictions had affected business towards the end of the year. However, issues with materials and supply which were prevalent over autumn appear to have eased, with construction firms reporting delays dropping to 34% from 47% in November.

Residential construction activity saw the strongest growth and was the only category to gain momentum in December. Commercial building lost its position as the best-performing segment, with the recovery easing to its lowest since September.

Meanwhile, civil engineering activity decreased slightly at the end of 2021, ending a nine-month period of expansion.

Looking forward to 2022, just over half of the survey panel forecast a rise in business activity during 2022, with only 9% predicting a decline – an upbeat start to the year.

Fraser Johns, finance director at Beard, said: “While growth slowed in December, the overall picture is a positive one. Supplier delays are easing slightly, price inflation is reducing and starting to find its new level, and customer demand has remained resilient.

“We are clearly still not quite out of the woods, with Covid cases rising and remaining uncertainty surrounding this latest variant.  Construction firms will need to ensure their safety measures are up to scratch.

“While there are certainly challenges, the new year will present opportunities. Customer demand hasn’t been hampered too much by the new variant, and in fact the latest rise in overall new order volumes was the largest since August.”

Gareth Belsham, director of the national property consultancy and surveyors Naismiths, commented: “Despite the slowing headline rate of growth, the PMI’s latest snapshot of the construction industry is mostly rosy.

“Even with the disruption caused by the Omicron variant, business sentiment remains strong – with half of construction firms predicting further increases in demand during 2022 – and inflationary pressure is easing.

“After a rollercoaster year for construction, the supply chain has once again earned its stripes – responding to soaring demand with an improved supply of both materials and labour that’s enabling contractors to power through the work that continues to come in.

“The industry begins 2022 with a spring in its step and solid order books, with December seeing the number of new orders recovering to its best level since August.”

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