UK Builders Hit by Record Pickup in Cost Inflation, PMI Shows

A worker at a construction site in Chelmsford, UK. Photo by Chris Ratcliffe /Bloomberg

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(Bloomberg) — British builders suffered the sharpest acceleration in cost pressures in at least three decades in March as the war in Iran drove up prices for fuel and raw materials. 

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S&P Global said its survey of construction firms found that delivery times increased for the first time since July and input-price inflation hit its highest since November 2022 during the aftermath of Russia’s invasion of Ukraine. The month-on-month pickup in cost pressures was the largest since the survey began in 1997.

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The wider construction purchasing managers’ index edged up to 45.6 from 44.5, stronger than economists had forecast but still signaling another decline in output. Builders reported firms delaying investment decisions and fragile confidence in the wake of the turmoil in energy markets caused by the US and Israeli attacks on Iran.

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It was the latest survey to show the conflict in the Middle East weighing on activity and stoking inflationary pressures in the UK. On Tuesday, the composite PMI raised fears of Britain’s economy slipping back into stagflation after the wider private sector flatlined in March and input prices climbed rapidly.

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“Escalating inflationary pressures, gloomy domestic economic prospects and higher borrowing costs were widely cited concerns in March,” said Tim Moore, economics director at S&P Global Market Intelligence. “Fuel surcharges and rising transport costs contributed to a surge in input cost inflation.”

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S&P said housebuilders remained the weakest part of the construction sector, though the latest decline was slightly less sharp than the previous month. Commercial and civil engineering activity also continued to see output fall. Demand was underpinned by energy infrastructure projects.

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The overall construction sector has now suffered 15 straight months of declining activity, the longest slump since the housing market crashed following the financial crisis. Expectations for future activity dropped to the lowest since December, new orders shrank at the fastest pace in four months and employers stepped up job cuts.

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