Survey respondents noted that higher costs and worries about the economic outlook had started to act as a brake on demand. Optimism about future workloads slipped to its lowest in more than 18 months.
At 58.2 in April, down from 59.1 in March, the headline S&P Global / CIPS UK Construction Purchasing Managers’ Index signalled the weakest rate of output growth since January. The index has nonetheless posted above the crucial 50.0 no-change mark in each month since February 2021.
Of the three main construction segments monitored by the survey, the fastest-growing remained commercial work (index at 60.5), followed by civil engineering (56.2). Residential work remained the worst-performing sub-sector in April and saw the greatest loss of momentum (at 53.8, down from 54.9 in March).
Construction firms cited pent up demand and spending related to Covid-19 recovery plans driving demand for commercial projects, while major infrastructure schemes such as HS2 and Hinkley Point C continue to boost civil engineering activity.
The near-term outlook for construction activity deteriorated in April as total new order volumes expanded at the slowest rate for four months. Escalating raw material prices and, in some cases, hesitancy due to higher borrowing costs and geopolitical uncertainty were reported as headwinds to demand.
A strong pipeline of construction projects and efforts to boost depleted stocks resulted in a steep rise in purchasing activity. Higher levels of input buying have been recorded in each month since June 2020. But suppliers are still struggling to keep up with demand for construction products and materials. Around 45% of the survey panel reported longer lead times, while only 2% had seen any improvement.
Supply chain delays were attributed to shortages of staff, materials and transport, with these difficulties often exacerbated by delays at ports and the war in Ukraine.
Higher prices paid for energy, fuel and raw materials led to a steep increase in average cost burdens during April. Survey respondents also noted that the removal of red diesel subsidies had pushed up costs. The overall rate of purchasing price inflation accelerated to its fastest since September 2021.
Looking ahead, 43% of construction companies are forecasting an upturn in business activity during the next 12 months and only 12% are expecting a fall. However, this gap is narrowing.