Uncertainty weighs on UK construction growth

Will Green is news editor of Supply Management
2 December 2016

Growth in the UK construction sector climbed in November but input prices rose at their fastest rate in more than five years.

The Markit/CIPS UK Construction Purchasing Managers’ Index rose to 52.8 in November, compared to 52.6 in October and against the neutral reading of 50.

Firms reported a steep and accelerated rise in costs, with inflation the highest in just over five-and-a-half years, and this was overwhelmingly linked to suppliers hiking prices in response to the weak pound.

Purchasing activity increased at the fastest pace since the start of 2016 and strong demand for inputs and low stocks among vendors resulted in the sharpest deterioration in supplier performance since June.

David Noble, group CEO, CIPS, said: “Higher prices were reported for a number of materials including bricks, blocks and slate, as businesses struggled with managing costs.”

Tim Moore, senior economist at IHS Markit, said: “A number of firms cited uncertainty related to supplier price hikes as an emerging threat to the construction sector, with survey respondents commenting on difficulties forecasting project costs against a backdrop of rapidly changing inflationary pressures.”

Respondents reported improved order books, resilient client confidence and strong demand for residential projects, though heightened economic uncertainty was a key factor weighing on output growth.

Noble said: “Reports of lingering uncertainty around the progress of Brexit negotiations had business optimism divided, where only 45% of respondents expected a rise in activity next year – one of the lowest since the middle of 2013.

“And as commentators warn about more inflationary impacts next year, the sector will be concerned that decisions from policymakers must ensure these effects are  minimised so that growth is maintained.”

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