Construction companies see six-month highs in rising costs

Rises in construction costs soared back to six-month highs in March after briefly dipping in February.

According to a well-respected survey of construction businesses around the country, February had seen a nearly year-low in the costs they were facing.

But a month later things looked very different.

Tim Moore, economics director at S&P Global, said: “Escalating fuel, energy and commodity prices led to the fastest rise in costs for six months. Intense inflationary pressures appear to have unnerved some construction companies.”

He was speaking as he released the S&P Global/CIPS construction purchasing managers index for March.

Despite increased costs for materials and staff, the survey showed that activity is still rising in the construction industry.

The index is a good estimate to measure whether the sector is growing and what sentiment is like. A score above 50 represents growth.

In March the sector was given a healthy score of 59.1, unchanged from February.

But while the headline score was the same, the data showed many changes, including the rising costs and a drop in business confidence.

Like their colleagues in other sectors, construction bosses are worried about the war in Ukraine, spiralling costs and a worse outlook for the global economy.

The sentiment was the worst for around a year and a half, researchers found.

Mr Moore added: “Business optimism slipped to its lowest since October 2020 on concerns that clients will cut back spending in response to rising prices and heightened economic uncertainty.”

CIPS group director Duncan Brock said: “A heartening result in March overall where new order levels were the highest since August last year, but not all the sub-sectors offered an equal contribution to output this month.

“Commercial projects were the most abundant, with the strongest rise in almost a year, but residential building became the laggard of the pack as affordability concerns were a factor in holding back progress, particularly in new housing and refurbishment work.

“The crippling rise in inflation ramped up again as transport and raw materials went up in price. Longer wait times for deliveries were reported by a third of supply chain managers.”