Building firms remain upbeat despite cost headaches

Construction output slowed in January as firms grappled with the biggest rise in costs since 2008 as a result of the Brexit-induced collapse in the value of sterling.

Sentiment in the construction sector remains buoyant despite the jump in costs. Picture: Lisa Ferguson

The closely watched Markit/Cips UK construction purchasing managers’ index (PMI) fell to 52.2 last month, down from 54.2 in December and below economists’ expectations of 53.8. A reading above 50 indicates growth.

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Construction sector brushes off fears over Brexit

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Order growth in January also slowed and the weak pound continued to have an inflationary impact, with purchasing costs rising at the strongest rate for almost eight and a half years as suppliers passed on higher prices for commodities and imported construction materials. All three sub-sectors – housing, commercial and civil engineering – recorded softer rates of output growth in January, the report said.

However, respondents to the latest survey signalled that sentiment is still buoyant, with confidence for the year ahead rising to its strongest since December 2015. This was put down to new projects and a better-than-expected backdrop. This led to more positive trends in staff hiring across the construction sector at the start of 2017.

Howard Archer of IHS Global Insight said: “This is a largely disappointing report indicating a stuttering construction sector, although increased optimism in the sector and rising employment provide some cheer.”