Economic uncertainty cuts UK construction sector optimism

Will Green is news editor of Supply Management
3 February 2015

The availability of subcontractors decreased while their costs rose in the UK manufacturing sector in January, according to a survey.

The Markit/CIPS UK Construction Purchasing Managers’ Index showed the availability of subcontractors decreased sharply, while a rise in charges was close to the survey record high recorded in November 2014. But overall input costs were offset by falling energy and fuel prices.

David Noble, group CEO, CIPS, said: “Falling input prices have helped the sector control spending costs, though the advantage was not as great as for other sectors.

“With supply chains under pressure, supply shortages, longer delivery times and a sharp fall in the performance of suppliers, there may still be challenges ahead.”

The survey recorded growth of 59.1 in January, up on December’s 57.6, but still down on 2014’s average of 61.8. A reading of 50 indicates no change.

Residential building was the strongest performing sub-category while volumes of new work increased across the sector. The rate of job creation eased to its weakest since December 2013.

Supply chain pressures persisted with a sharp deterioration in vendor performance and anecdotal evidence suggested strong demand for materials and a lack of spare capacity among suppliers contributed to longer delivery times.

Almost half the survey panel forecast a rise in business activity over the next 12 months and less than one-in-10 anticipated a reduction. But business optimism was the second lowest since October 2013, with firms citing uncertainty about the overall economic outlook.

Tim Moore, senior economist at Markit, said: “UK construction companies have found their feet after a protracted slowdown in output growth at the end of 2014.

“The peak speed of the construction recovery seems to be over but reports of its death have been greatly exaggerated.”

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