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The UK construction sector witnessed one of its steepest increases in input cost inflation in nearly four years during the past month, according to the latest S&P Global survey. Rising geopolitical tensions in the Middle East, particularly disruptions linked to the Iran conflict, led to supply chain delays and higher material costs across the sector. Construction activity also weakened sharply, with residential and civil engineering projects seeing the biggest slowdown. The survey further highlighted declining new orders, weaker business confidence, and faster job cuts as developers and contractors dealt with rising operating costs and uncertain market conditions.
British construction companies faced a sharp increase in input costs during the past month as supply chain disruptions and geopolitical tensions added pressure on the sector, according to the latest S&P Global UK Construction Purchasing Managers’ Index (PMI) survey. Advertisement
The survey showed that the index tracking input cost inflation jumped to 81.4 from 70.5 in the previous month, marking its highest level since mid-2022. S&P Global stated that this was among the steepest month-on-month increases recorded since the data series began in 1997. Around 69% of surveyed firms reported higher input costs during the month, compared to 48% in the previous survey period.
The overall construction PMI, which measures business activity across the sector, dropped to 39.7 from 45.6 earlier, reaching its weakest level since last November and falling below market expectations in a Reuters poll. A reading below 50 indicates contraction in activity.
Tim Moore, economics director at S&P Global Market Intelligence, stated that the UK construction sector experienced a rapid acceleration in input cost inflation. He noted that excluding the post-pandemic period between early 2021 and mid-2022, the latest rise in purchasing costs was the sharpest seen in nearly three decades of data collection.
The report highlighted that the ongoing conflict in the Middle East created fresh pressure on global supply chains. Shipping disruptions linked to restricted vessel movement through the Strait of Hormuz resulted in longer delivery timelines, with businesses reporting the most widespread shipping delays since late 2022.
Apart from higher costs, the sector also saw weaker demand conditions. New orders declined at the fastest pace since last November as developers and contractors remained cautious amid rising uncertainty and elevated expenses. Employment conditions weakened further, with firms reporting faster job cuts due to lower workloads and increased payroll costs.
The survey showed that civil engineering and residential house-building recorded the steepest decline in activity, while commercial construction performed relatively better despite continued contraction. The slowdown comes as the UK housing market and infrastructure sector continue to face pressure from elevated financing costs and subdued investor sentiment.
The Bank of England is closely monitoring inflation trends and cost pressures across industries as policymakers assess whether the economic impact of the Middle East conflict could keep inflation elevated for a longer period and influence future borrowing costs.
A separate survey released by the Royal Institution of Chartered Surveyors earlier during the week showed that UK construction activity in the three months leading up to March was the weakest since the pandemic-hit period of mid-2020, when several construction sites temporarily shut operations during COVID-19 restrictions.
Despite the weakness in construction, the broader all-sector PMI, which combines services, manufacturing, and construction data, improved to 51.5 from 49.9 earlier, supported mainly by stronger services sector performance.
Source Reuters
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