The Markit/CIPS UK Construction PMI February survey shows that UK construction companies recorded a sustained expansion of overall business activity in February, with civil engineering replacing house building as the main growth driver. Residential activity increased at the slowest pace for six months, while commercial building declined for the first time since October 2016.
The latest survey revealed a further solid expansion of employment numbers, despite a slowdown in new business growth to its weakest for four months. Meanwhile, intense cost inflation persisted in February, which was overwhelmingly linked to higher prices for imported materials.
Tim Moore, Senior Economist at IHS Markit and author of the Markit/CIPS Construction PMI®, said: “February’s survey data highlights that the UK construction sector has rebounded from its post referendum soft patch but remains on a relatively slow growth trajectory. Weaker momentum in the house building sector was a key factor weighing on construction growth, alongside a renewed fall in work commercial projects.
“Survey respondents mainly cited an underlying slowdown in sales growth, with the latest rise in new work the weakest for four months. In some cases, construction companies reported that sharply rising input prices had a disruptive impact on contract negotiations.
“February data revealed that input cost inflation remained at levels last seen in the summer of 2008. Suppliers’ efforts to pass on rising energy costs and global commodity prices have been amplified by the weak sterling exchange rate.”
Duncan Brock, Director of Customer Relationships at the Chartered Institute of Procurement & Supply, said: “Suppliers were challenged this month as they groaned under the weight of higher demand and some material shortages, with the sharpest drop in performance since June 2015. This impacted on the sector’s overall pace of activity, as delivery times lengthened for bricks, blocks and roofing tiles.
“Housing was singled out as a drag with its weakest performance for six months. As a previous driver of growth, there will be concerns about this softening of house building activity. The drop in sub-contractor availability was the largest seen since January 2016, against a backdrop of rising employment numbers across the construction sector, which will add to worries around labour market capacity as we move along the path to Brexit.
“But overall, the sector’s optimism was still high as workloads remained strong, propped up by the prospect of new projects and repeat business. Though the level of new orders was modest, it is the relentless and brutal rise in prices for construction materials, combined with the impact of the weaker pound, that could block the sector’s progress in the coming months.”
Robert Grigg, Managing Director of Property Finance at Hampshire Trust Bank, responds to today’s Markit UK Construction PMI: “Today’s figures are positive news for the construction industry and echo the sentiment of our recent SME Growth Watch Report, which found that half (51%) of SMEs in the construction sector are optimistic about their long term growth prospects. While this is encouraging, greater measures need to be taken to support our construction industry, in particular SME housebuilders, as we believe these firms hold the key to boosting the level of housing stock in the UK.”