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Construction sector continues growth as price increases ease

The housebuilding sector roared ahead of other construction firms.

04 March 2022

The rapid cost increases in the construction sector showed further signs of easing off in February after months of heavy rises, according to new survey data.

Builders reported they were still facing problems in supply chains, and that prices for materials and other inputs rose in February.

But the reported rise was its lowest in 11 months, after half a year of slow easing off.

Usamah Bhatti, an economist at IHS Markit, said: “Widespread reports of shortages of materials and labour continued to plague the UK construction sector, while rising input costs placed further strain on businesses.

“It appears that the peak of price pressures has passed as the rate of input cost inflation eased for the sixth month in a row to reach the softest since last March.”

The data comes from the IHS Markit and CIPS construction purchasing managers’ index survey.

The survey gives the industry a score where anything above 50 is considered growth. In February it scored 59.1, up from 56.3 a month earlier.

It was the 13th month of consecutive growth for the sector, driven by the housebuilding industry which roared ahead with a score of 61.5.

Around 36% of the businesses that were surveyed reported that their suppliers took longer to deliver items in February, but this is down from a peak of 77% in mid-2021. Just 4% saw improvements in delivery times.

“Reports of supplier delays were considerably lower than those seen in the middle of last year,” Mr Bhatti said.

“Yet, price and supply constraints weighed on overall business confidence, which eased to the softest in just over a year.”

Duncan Brock, group director at the Chartered Institute of Procurement & Supply, said: “The construction sector maintained its growth momentum whilst battling a number of headwinds such as supply issues and higher input costs to put in its best performance for eight months in February.

“All three sectors offered positive news, but housing stormed ahead with the strongest rise in residential building since June last year.

“The reasons for this improvement ranged from securing contracts in the pipeline of new work and improved deliveries for some materials

“Curbing inflation will continue to be a big issue for building firms who will be nervous about securing continuing supply and offsetting price rises to improve business margins, especially if costs continue their skyward trajectory.”

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