Cost pressures starting to hurt, survey shows

Construction input costs remained at an eight-and-a-half year high in February, according to the latest Markit/CIPS survey, with companies reporting that the hike in costs was negatively impacting on contract negotiations.

The figures come after input costs made their fastest jump since August 2008 in January.

Those surveyed in the latest Markit/CIPS survey of purchasing managers also linked the continued hike in costs to higher prices for imported materials driven by the weak sterling exchange rate against the US dollar and euro.

Commercial building declined for the first time since October last year and residential building increased at the slowest pace for six months, the survey reported.

But despite this, the construction sector grew slightly on the back of an increase in civil engineering activity in February, rising to 52.5 for the month, up from 52.2 in January.

Employment numbers also grew during the month and construction companies remained positive about growth prospects over the next year with nearly half (48%) predicting a rise in activity.

Max Jones, global corporates relationship director for construction at Lloyds Bank Commercial Banking, said: “The industry is reasonably upbeat, particularly at the larger end of the market, despite the ongoing wider political and economic uncertainty in the UK economy.

“For listed contractors, the reporting season revealed that firms are in generally good health. In this sense, the years since the recession - with more focussed strategies, increasingly disciplined approaches to contract bidding and improving margins - appear to be paying off.

Mark Robinson, chief executive at Scape Group said: “Ten months ago the triggering of Article 50 seemed like a distant worry but D-Day for Brexit is fast approaching.

“I anticipate the triggering of Article 50 will negatively impact output but, similar to the slowdown seen following the Brexit decision, this should be a temporary blip”.