The latest monthly survey of construction purchasing managers shows that civil engineering activity was the best performing area of construction in February – due in part to increased spending by local authorities on capital projects and maintenance in response to recent flooding and adverse weather conditions.

Commenting on the survey, Tim Moore, Senior Economist at Markit and author of the Markit/CIPS Construction PMI® said that construction work related to flood relief and infrastructure maintenance rose sharply over the month.

The latest Markit/CIPS UK Construction Purchasing Managers’ Index says that civil engineering has now overtaken housing as strongest area of growth. Construction companies indicated another strong overall performance in February, despite output and new business growth easing since the previous month. Job creation meanwhile hit a three-month high and firms remained highly positive about their expectations for business activity over the year ahead.

Residential construction increased sharply in February, but at the slowest pace for four months. Growth of commercial activity also eased in February, and was the least marked since November 2013. Civil engineering activity was the best performing area of construction in February, with the pace of expansion the steepest since the series began in April 1997. Construction firms noted greater spending among local authorities on capital projects and maintenance, in some cases in response to recent flooding and adverse weather conditions.

February data indicated a sharp rise in new work received by construction companies, although the pace of expansion eased to the slowest for four months.

Higher levels of output and new business resulted in further sharp increases in both employment and purchasing activity across the construction sector. The latest rise in staffing levels was the fastest for three months, which some respondents linked to robust confidence about the business outlook.

Around six times as many construction companies (59%) expect a rise in output over the year ahead as those that forecast a reduction (10%).

Supply chain pressures contribute to higher costs

Survey respondents also noted that supply chain pressures had contributed to higher cost burdens, with the overall rate of input price inflation accelerating from the five-month low recorded in January. In addition, average rates charged by sub-contractors increased at a survey-record pace during February. This reflected a fall in sub-contractor availability for the eighth month running, which is the longest period of decline since that seen in 2007.

Sharp rise in flood construction work and infrastructure maintenance 

Tim Moore, Senior Economist at Markit and author of the Markit/CIPS Construction PMI®, said:

“Construction output growth succumbed somewhat to the recent wet weather, with temporary disruptions from heavy rainfall most acute for house building activity in February. Consequently, residential work ceded its place as the best performing category to civil engineering, as construction work related to flood relief and infrastructure maintenance rose sharply over the month.”

“While some froth has come off overall construction growth in February, the latest data showed that job creation picked up to a pace rarely seen since the summer of 2007. Moreover, in the latest survey there were six construction companies forecasting higher activity over the year ahead for every one anticipating a reduction.”

“As a result, there appears an undiminished depth of belief among construction companies that strong growth will be sustained this year, helped by more favourable economic conditions and an ongoing house building recovery.”

Strongest rise in survey's history due to spend on flood infrastructure and maintenance

Commenting on the report, David Noble, Chief Executive Officer at the Chartered Institute of Purchasing & Supply, said:

“Bad weather took a bite out of progress in house building, but UK construction remains on a strong growth trajectory in February. The sector was fuelled by the strongest rise in civil engineering activity in the survey’s history, as an increase in spending was recorded on investment and infrastructure projects in response to recent flooding. Even though both housing and commercial activity suffered a slide in pace of growth in February, the overall performance was one of continued expansion.

“Rising employment and highly positive business expectations also suggest that the slowdown will only be temporary. Backed by favourable market conditions, firms are continuing to increase staff numbers, hitting a three-month high this month.

“Strong demand is continuing to put pressure at a supplier level, with vendors battling with low stocks and prices increasing as a result. While delivery times are still deteriorating, they are at least doing so at the slowest rate since August 2013, suggesting that the very worst of the squeeze has passed.”

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