Decreased construction activity was reported for the fifth consecutive month in the latest update to the S&P Global/CIPS UK Construction Purchasing Managers’ Index, but optimism was at a two-year high.
The index, which tracks changes in the volume of business activity through a survey of around 150 construction firms, was at 48.8 in January, up from 46.8 in December and the highest reading since August 2023. Anything below 50 signifies a decline in activity.
Best performing was civil engineering, which recorded output levels at 49.8, while house building was at 44.2, with respondents citing the effects of continued subdued demand.
Total new work decreased for the sixth month running, but at a slower pace, with companies reporting the impact of delayed decision-making among clients and subdued market conditions.
Despite the decreased output and new orders, 51% of the panel forecast a rise in business activity during the next 12 months, which was the highest level of business optimism since January 2022. They pointed to better financial conditions and consumer confidence set to make a difference.
On the input costs side, respondents signalled an increase in prices at the fastest rate since May 2023, particularly in relation to imported items and the associated shipping costs.
BCIS Chief Data Officer Karl Horton said: ‘Annual growth in the BCIS General Building Cost Index (GBCI), is forecast to be 3.2% in 1Q2024.
‘Projects will of course be affected in different ways depending on their constituent parts and resources required, and labour has become the most significant cost-driver.
‘We are also keeping a close eye on events in the Red Sea and how much of an inflationary effect the delays to shipping might have.’
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