Inflation worries and impact of Ukraine war take gloss off rise in output

Escalating inflation and the impact of the war in Ukraine took the gloss off another rise in construction output with confidence in the sector sagging to a near 18-month low.

The latest PMI data drawn up by IHS Markit and CIPS said total activity for March stood at 59.1, unchanged from the month before.

But confidence slumped to its lowest level for 17 months when the UK was still in the grip of the covid-19 pandemic.

It said less than half were expecting a rise in business activity, although just 15% were planning for a reverse. However, the survey said the balance of positive sentiment was at its weakest since October 2020.

The survey said firms were jittery about the ongoing war in Ukraine, now in its seventh week, severe cost inflation and worries about the global economic outlook.

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Tim Moore, director at IHS Markit, which compiles the survey, admitted: “Intense inflationary pressures appear to have unnerved some construction companies.”

And Scape group chief executive Mark Robinson added: “The conflict in Ukraine has further strained existing supply issues, while the rising cost in energy is clearly unsustainable for those managing tight margins.”

March’s score of 59.1 was the joint fastest rate of growth since last June, with the figure being driven by a continued recovery from the commercial sector which posted another improvement for the third month in a row with a score of 60.8.

While the scores for civil engineering, 56.3, and the 54.9 for housebuilding were above the 50 no change mark, the CIPS survey said the numbers had tapered off from their February equivalents.

Fraser Johns, finance director at regional contractor Beard, said: “Input buying and job creation, key indicators of the sectors overall health, show the sector is gaining momentum. However, there are hurdles to overcome.

“Optimism in the sector is low as inflation, combined with rising energy prices and difficulties filling jobs are potential issues on the horizon.”

Duncan Brock, group director at CIPS, said: “A heartening result in March overall but not all the sub-sectors offered an equal contribution to output this month. Residential building became the laggard of the pack as affordability concerns were a factor in holding back progress particularly in new housing and refurbishment work.”

Around 33% of the survey panel reported longer lead times for construction products and materials, while only 1% saw an improvement – although the delays remained less widespread than the peak seen last summer.