Construction sector ‘awash with positive sentiment’

MarkitUK construction companies indicated a further acceleration in output growth during February, driven by the fastest increase in new orders since October 2014, new figures have revealed.

The latest Markit/CIPS UK Construction PMI index rose to 60.1 in February from 59.1 in December.

Higher levels of activity were seen in all three sub-categories of construction work, with residential activity again seeing the steepest rate of growth. Strong demand for construction materials, alongside ongoing shortages of stock at suppliers, contributed a steep and accelerated rise in input prices. Moreover, rates charged by sub-contractors increased at the most marked pace since the survey began in April 1997.

More than half of the survey panel (51 per cent) anticipate a rise in business activity over the next 12 months, while less than one-in-ten forecast a reduction (9 per cent).

David Noble, group chief executive officer at the Chartered Institute of Procurement & Supply, said: “The construction sector is awash with positive sentiment, rejecting wholeheartedly the downbeat end to last year, with the steepest rise in output activity for four months.

“The good fortune comes in threes – as respondents report a rise in staffing levels, higher levels of new orders and rising rates for subcontractors.

“Clients are ready to spend, resulting in rising employment levels, but tempered by continuing skills shortages now seen for a number of months.

“Subcontractors have been the winners; their rising rates evidence of continued demand for their capacity and the strongest since records began.

“As the sector revives a little more after the devastating effects of the recession, supply chains are experiencing increased pressure and vendors are struggling to keep pace resulting in longer delivery times.

“Generally worldwide, commodity prices have been falling, but the sector is experiencing strong demand for quality materials and so supply continues to be challenging.”

Tim Moore, senior economist at Markit and author of the Markit/CIPS Construction PMI, said: “The latest survey highlights renewed vitality within the UK construction sector, as output growth picked up further from the soft patch seen at the end of 2014. Housing, commercial and civil engineering activity all expanded at the quickest rates since last October, helped by sharp rises in new business volumes and an improving economic backdrop.

“Stronger short-term growth momentum in February was matched by positive sentiment towards the year-ahead business outlook. However, some construction companies noted that the uncertain General Election outcome could prove a temporary bump in the road for new work, as some clients had sought to delay spending decisions.

“Supply-chain pressures have been prevalent across the UK construction sector throughout the post-crisis recovery, which continued to drive up costs and lengthen delivery times for construction materials in February.

“Tighter labour market conditions also helped push up operating costs, as highlighted by the fastest rise in sub-contractor charges since the survey began almost 18 years ago.”

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