UK construction grows but price concerns remain

The UK construction industry showed strong growth for the first quarter of this year.

That’s according to the latest purchasing managers’ index (PMI) published yesterday by CIPS/Markit.

However, the report found that sector, which accounts for around 6.3% of GDP, is increasingly under pressure from rising prices.

The index for March stood at 56.4, marginally down on February’s eight-month high of 56.5. New business growth remained marked, while the rate of reduction of staffing levels fell to the weakest in the current nine-month sequence of decline.

Meanwhile, cost inflation intensified again, reaching the highest since mid-2008.

New business received by UK construction companies increased for a thirteenth successive month in March. However, the rate of new order growth slowed since February, and was below the long-run trend.

After the snow wiped out most of December, – the index stood at 49.1 -, it bounced back in January to 53.7 and has continued expanding since.

Growth in housing measured 57.1 on the index, commercial activity 53.1 and civil engineering 58.5.

Sarah Ledger, cconomist at Markit said: “UK construction companies reported a strong end to the first quarter, with activity rising at a similar pace to the eight-month high recorded in February. The data therefore add to the generally positive flow of data that have been seen since the new year, adding to evidence that the economy rebounded strongly from the surprise contraction of GDP in the final quarter of last year.

“However, whether the resurgent growth will prove long-lasting remains in doubt. Worryingly, new order growth slowed more notably than that of activity in March, pointing to a slowdown in activity over the coming months, especially if the pattern is sustained.”

David Noble, chief executive officer at the Chartered Institute of Purchasing & Supply, said: “On the surface there wasn’t much of a change in the construction sector in March, but there is plenty to put businesses on edge about their future prospects. Fractionally weaker levels of activity and a more noticeable slowdown in new orders contributed to an easing of business confidence, which remains at historically low levels.

“The spectre of government spending cuts is causing the greatest concern, particularly as government stimulus starts to crumble. We may also be at the tail-end of temporarily higher activity levels seen after Q4’s weather disruption.”

About Fiona Russell-Horne

Group Managing Editor across the BMJ portfolio.

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