Construction output last month showed the strongest activity since mid-2021 amid stronger client confidence and work on new projects commencing, according to the latest report by HIS Markit.
Companies however continued to report widespread supply constraints and rapidly increasing input costs, though the rate of inflation in the latter was the least severe for 11 months.
House building replaced commercial work as the best performing category of construction work in February, showing the strongest upturn for eight months. Commercial construction also expanded at a quicker pace than in January, with the rate of growth the sharpest since last July.
Usamah Bhatti, Economist at IHS Markit, said: “UK construction companies achieved a faster expansion in output volumes in February as the economy recovered from the recent wave of Covid-19 infections related to the Omicron variant. House building had the strongest showing, as signalled by the fastest rise in residential work for eight months.
“Despite continued volatility in price and supply conditions, the overall rate of new order growth accelerated from January to reach the fastest since last August as client confidence improved in line with economic activity as Plan B restrictions were fully lifted.
“Nonetheless, 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. At the same time, reports of supplier delays were considerably lower than those seen in the middle of last year. 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. That said, hampered supply chains still made business difficult across all sectors and deliveries remained painfully slow.”
Also, the highest rise in order books for six months didn’t do enough to improve future optimism as business expectations dropped to January 2021 levels. 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.”
