Construction sector remains in growth territory despite soaring input costs

Sharply rising energy and raw material costs have hit the UK’s construction sector, but businesses are still expanding, new figures reveal.

A closely watched survey found that the increased prices that companies are paying for energy, fuel and raw materials led to cost inflation hitting its highest since last September.

The S&P Global/Cips construction purchasing managers’ index (PMI) survey gives the sector a score each month. Any reading above 50 denotes growth, while under 50 signals contraction.

After two months at 59.1, the index posted a drop to 58.2 in April.

Tim Moore, economics director at S&P Global, said: “The construction sector is moving towards a more subdued recovery phase as sharply rising energy and raw material costs hit client budgets. House building saw the greatest loss of momentum in April, with the latest expansion in activity the weakest since September 2021.

“Commercial and civil engineering work were the most resilient segments, supported by Covid-19 recovery spending and major infrastructure projects respectively.”

Gareth Belsham, director of the national property consultancy and surveyors Naismiths, said: “Storm clouds might be gathering but they haven’t yet broken. Britain’s construction sector is still busy and new orders continue to roll in, but it is losing momentum.

“This week’s decision by the Bank of England to raise interest rates, not to mention its bleak economic forecast, will serve as a reality check for housebuilders in particular,” he added.

Experts say Britain’s construction sector is still busy and new orders continue to roll in, but it is losing momentum. Picture: Jane Barlow/PA Wire

The PMI survey found that suppliers are struggling to keep up with demand for construction materials and other products.

Of those polled, around 45 per cent reported that it was taking longer to get goods delivered, while only 2 per cent said there had been an improvement.

Brendan Sharkey, head of construction and real estate at MHA, said: “The UK construction sector continues to ride a wave of strong demand. However, construction work is now less profitable due to inflation and interest rate rises.

“Russia’s invasion of Ukraine continues to be responsible for some staggering price increases. We’ve seen the price of certain raw materials surge by 20 per cent or more within a month,” he added.