Construction heats up after winter freeze

Julian Harris
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GROWTH in UK construction hit an eight-month high in February, as the sector bounced back from a snow-affected winter.

However, margins in the industry are taking a hammering from soaring commodity prices, with input costs rising at their fastest rate since August 2008.

The latest purchasing managers’ index, released yesterday, reported a rise to 56.5 in construction activity -- up from 53.6 in January and 49 in snow-hit December. All scores above 50 signal growth.

Yet the input prices index jumped almost six points, to 73, with respondents citing inflation concerns for below-average business confidence.

Nonetheless, February’s continued rebound in construction surprised observers, with new orders also spiking to an eight-month high. While employment is still falling in the sector, the jobs level is approaching parity, moving to 49, from 47.5 in January.

All three parts of the industry – housing (57.6), commercial (53.1), civil engineering (58.7) – recorded accelerated growth.

“Having contracted by 2.5 per cent in the final quarter of last year, the official GDP measure of construction output should bounce-back into positive territory in this quarter,” said Sarah Ledger of Markit, which conduced the survey along with the Chartered Institute of Purchasing and Supply.

Yet despite extremely positive business surveys since the beginning of the year, the economy will grow a mere 1.2 per cent in 2011, the Institute of Directors predicted today.

“If the reduction in public spending was slowed, it would be more damaging to growth than the current course, owing to the negative impact on financial markets and business confidence,” added IoD economist Graeme Leach.