Building costs rise after Red Sea disruption

CONSTRUCTION firms have seen the first jump in building costs since last autumn as Red Sea disruption sent shipping prices higher, according to a report.

The latest S&P Global/CIPS construction purchasing managers’ index (PMI) revealed that overall input costs rose last month for the first time since September and at the fastest pace since May last year.

Some firms flagged higher costs for imported building materials due to the Red Sea attacks on ships, according to S&P Global.

This is mostly affecting imports from Asia, it said.

Despite the cost pressures, the PMI report showed construction firms were the most optimistic in two years on hopes that interest rates have peaked and the worst of the downturn is behind them.

The report recorded a betterthan-expected reading of 48.8 in January, up from 46.8 in December and the highest reading since August last year. Most economists had expected a PMI score of 47.2 in January.

The figure remained below the crucial 50 no-change threshold for the fifth month running, which indicates that output from the sector continues to contract, albeit at a slower pace.

Tim Moore, economics director at S&P Global Market Intelligence, which compiled the survey, said: “UK construction companies seem increasingly optimistic that the worst could be behind them soon as recession risks fade and interest rate cuts appear close on the horizon.

“The prospect of looser financial conditions and an improving economic backdrop meant that business activity expectations strengthened to the highest for two years in January.”

The report showed that housebuilding continued to drop last month, although at the slowest pace since March last year.