UK construction growing at fastest pace for 24 years as demand booms

Britain’s construction industry is growing at the fastest pace for 24 years amid booming demand for homes and commercial property.

Research group IHS Markit said its index of activity – where scores above 50 show growth – rose from 64.2 in May to 66.3 in June, the strongest score since June 1997. 

Commercial work grew at the fastest rate since 1998 and housebuilding at a pace not seen since 2003. Builders noted ‘a rapid turnaround in demand’.

Building boom: Research group IHS Markit said its index of activity in the construction sector has showed its strongest score since June 1997

However, severe shortages of construction products and materials meant prices rose at the sharpest rate since the survey began in 1997, which could fuel fears of a heady bout of inflation as Britain bounces back from the pandemic.

‘Supply chains once again struggled to keep up with demand,’ said IHS Markit economics director Tim Moore.

The Bank of England expects inflation to peak above 3 per cent but predicts the bottlenecks that are partly behind the rise will be temporary. 

Construction slumped at the start of the pandemic but recovered faster than other parts of the economy as it was less affected by social-distancing restrictions and house prices boomed.

The strength of the recovery will boost hopes that the economy bounced back strongly in the second quarter of the year after a 1.6 per cent contraction in the first quarter left output 8.8 per cent below pre-pandemic levels. 

Martin Beck, adviser to the EY Item Club, said: ‘The economy looks to have shrugged off the delay to lifting remaining Covid restrictions.’

Charlie Bean, from the Office for Budget Responsibility, said the recovery was stronger than expected, but it remained to be seen how many migrant workers had left Britain, how many furloughed workers would return to their jobs and how many firms will go bust.