Construction boosted by spike in new work

UK construction activity expanded at its sharpest rate for four months in February, according to the latest Markit/CIPS UK Construction PMI survey.

The industry barometer found higher levels of activity in all three sub-categories of construction work, with residential posting the steepest rate of growth.

The index registered 60.1 in February, up from 59.1 in January - above the 50.0 threshold that separates expansion from contraction for the 22nd successive month.

Strong demand for construction materials, alongside ongoing shortages of stock at suppliers, contributed to a steep and accelerated rise in input prices, while rates charged by sub-contractors increased at the most marked pace since the survey began in April 1997.

Construction companies mostly linked new business gains to improving economic conditions and positive sentiment towards the business outlook. However, some survey respondents noted that uncertainties related to the outcome of the general election had resulted in delays to spending decisions among clients.

Higher levels of business activity contributed to further job-creation across the construction sector in February, although the rate of employment growth moderated to its least marked level since December 2013.

David Noble, chief executive at the Chartered Institute of Procurement & Supply, said the construction sector was “awash” with positive sentiment in contrast to the “downbeat” end to 2014.

“The good fortune comes in threes - as respondents report a rise in staffing levels, higher levels of new orders and rising rates for sub-contractors,” he said.

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

Fifty-one percent of the survey panel anticipated a rise in business activity over the next 12 months, while fewer than one-in-10 forecast a reduction.