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UK construction continues to experience cost inflation as new work declines for second month running  according to the February IHS Markit/CIPS UK Construction Purchasing Managers’ Index (PMI) survey. 

February PMI data pointed to continuing subdued growth conditions but total business activity increased only marginally during the latest survey period, while new work decreased for the second month running. Anecdotal evidence suggested that fragile business confidence and ongoing political uncertainty remained key factors holding back client demand. At the same time, strong input cost pressures were reported in February, with higher raw material prices, fuel bills and staff wages reported by survey respondents.

Tim Moore, Associate Director at IHS Markit and author of the IHS Markit/CIPS Construction PMI, said: “The construction sector endured another difficult month during February, with fragile business confidence, entrenched political uncertainty and softer housing market conditions all factors keeping growth in the slow lane. Residential work appears on track to experience its weakest quarter since Q3 2016, suggesting that house building is losing its status as the main engine of construction growth.

“The increase in work on commercial projects during February was one of the strongest seen over the past two years. Some construction firms noted that greater industrial demand, alongside structural changes in consumer spending habits, had contributed to new project opportunities.

“Despite pockets of resilience in the UK construction sector, there was little sign of an imminent turnaround in overall growth momentum. Reflecting this, total volumes of new work dropped for the second month running in February and business optimism was among the weakest recorded by the survey since 2013.”

Duncan Brock,  Director of Customer Relationships at the Chartered Institute of Procurement & Supply, said: “The sector was feeling as flat as a pancake in February with falls in new orders for the second month in a row and with just a marginal rise in overall activity, as ongoing political and economic uncertainty shouldered the blame.

“Cost pressures continued to creep up and bear down on purchasing activity as raw materials became even more expensive and in shorter supply, and vendor performance degraded again impacting on the completion of projects. A talent shortage also gave staff the power to demand higher wages, adding to the overall cost burdens for business.

“Housing bore the brunt of this disappointing performance, though there was a weak improvement this month. With the Government’s intention to increase housing stocks, there will have to be a boost to the sector’s fortune for these two trajectories to align.”

Construction companies indicated that business confidence moderated since January and was at one of the lowest levels seen in the past five years. Some firms noted that resilient UK economic conditions had supported optimism. However, there were also reports that Brexit-related uncertainty continued to influence decision making and act as a drag on the demand outlook.

At 51.4 in February, the seasonally adjusted IHS Markit/CIPS UK Construction Purchasing Managers’ Index® (PMI®) edged up from January’s four-month low of 50.2. This signalled a marginal increase in construction output during February, with the index also weaker than seen on average in 2017 (52.3).

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