Surge in housebuilding reported in May

Housebuilding grew at its fastest pace in seven years, boosting construction’s new orders but also depleting already scarce supplies of construction materials, according to purchasing managers. 

The housing sector was the strongest performer for the month of May’s IHS Markit/CIPS UK construction PMI survey, with its index score jumping to 66.3 from 61.2 in April.

Duncan Brock, group director at the Chartered Institute of Procurement & Supply, said: “Residential work was back in the top spot as house building rose at the quickest pace since August 2014, serving as an antidote to the recent scarcity in housing for lets or buy, and driven by consumer demand and a boost from the stamp duty holiday.”

Overall, the update has revealed a fourth straight month of construcion growth activity - the twelfth consecutive month for housebuilding - with the overall PMI activity index jumping to 64.2 in May, up from 61.6 in April.

Mirroring order book growth, the overall rate of input price inflation was the highest in the survey’s 24 years of data collection.

The survey found that stretched supply chains and steep rises in raw material prices had contributed to a rapid increase in average cost burdens.

Suppliers’ delivery times also lengthened sharply in May, with the downturn in vendor performance the second-steepest since the survey began, exceeded only by that seen in April 2020 at the start of the pandemic.

Some firms also noted that the volume of materials purchases had been boosted by efforts to build inventories in response to well-publicised materials shortages.

Tim Moore, economics director at IHS Markit, said: “Despite severe challenges with materials availability, construction firms remain highly upbeat about their near term growth prospects.”

However, Andrew Shepherd, managing director at TopHat Solutions, warned: “Despite the construction sector’s impressive rebound, inflationary rises caused by a severe lack of materials means that there is a real risk that the industry’s performance runs out of steam.”

CIPS’ Brock said: “Busy purchasing managers were under pressure to keep up and buying up at the fastest rate since April 1997, changing sourcing strategies to find depleting essential materials and stocking up just as supply chain problems continued to mount along with prices.

“With inflation for goods and raw materials at a 24-year high, companies will be concerned that much-needed profits will be eaten away as building projects take shape and could be held up by some of the longest delivery times on record.”

Commercial work was the second best performer in the index, rising at its fastest rate since August 2007, to 64.4 up from 62.2, reflecting strong demand conditions following the reopening of much of the UK.

Civil engineering activity also increased sharply during May, with the index sitting at 61.3 although the pace of expansion eased slightly since the previous month when it was 61.5.