Recovering commercial work helps industry shrug off Omicron gloom

Growing confidence in commercial work helped construction recover from the doldrums in December with growth in the sector bouncing back to a six month high last month.

Fears that the Omicron variant would put the brakes on growth in January failed to materialise with output improving to 56.3, according to the latest IHS Markit/CIPS survey.

The number was up from December’s 54.3, the weakest figure for three months, and was the strongest rate of growth since last July.

Commercial work also recorded its best score since last summer with the waning threat of Omicron and lifting of the government’s Plan B restrictions, which included working from home orders, helping it to a figure of 57.6 – its highest since July.

Civil engineering was also back in the black and above the crucial 50 no change score at 53.2 after going into reverse in December with a score of 49.1. The housebuilding sector recorded a score 54.3, although this was its lowest figure for four months.

Tim Moore, director at IHS Markit, which compiles the survey, said: “Commercial construction activity benefited from fewer concerns about the Omicron variant and strong business optimism about recovery prospects over the course of 2022.”

But the report said rising inflation was still a threat, even though it eased to its lowest figure since January last year.

Max Jones, a director of Lloyds Bank’s infrastructure and construction team, said: “Inflation remains the most pressing [issue], particularly the inflationary impact on wages that has been exacerbated by demand from major projects in recent months. Elsewhere the rising cost of materials continues to hit smaller players hardest, leading to an increase in the number of insolvencies across the industry.”

And Scape chief executive Mark Robinson added: “Contractors and project leads will continue to be wary of rising inflation, with yesterday’s interest rate rise [from 0.25% to 0.5%] set to further influence budgets and bottom lines.”

The report said optimism was at its strongest since last May – when the country was coming out of restrictions following last winter’s lockdown – with IHS saying it reflected an increase in tender opportunities and positive sentiment about the strength of the wider economy.