Lincolnshire construction firms say they are remaining sceptical despite the industry ending 2016 on a high.
Across the UK, output increased at its fastest pace since March but input cost inflation reached its highest level since April 2011, according to a Markit/CIPS survey.
The industry received the fastest rise in new order columns since January, 2016, according to the UK Construction Purchasing Managers’ Index (PMI), and stronger demand patterns have resulted in sustained job creation and a broad-based upturn in business activity during December.
However, the construction sector continued to experience intense cost pressures as suppliers passed on higher imported raw material prices. The latest rise in overall input costs was the steepest for just over five-and-a-half years.
Steve Gelder, CEO of Lincoln-based Gelder Group, said: “I once read an article entitled Beware a rising market and this has stuck with me.
“So for the past couple of months we have been building in inflation to tender prices. The construction sector is a good barometer of what is going on in the market.
“We are seeing increased orders – in fact our forward order book is close to record levels – but we are also receiving a plethora of notifications advising of material price increases.
“The full impact of Brexit is not fully understood, however with 85% of the world’s goods sold in dollars and with the pound 20% down against it as a direct result of the vote, it doesn’t take a genius to work out that we are in for a period of sustained inflationary pressure.
“The weak pound maybe good for exporters, for everyone else, it creates some real challenges and the construction industry is no exception. 2017 promises to be a bumpy ride!”
Residential building activity remained the best performing sub-category at the end of 2016. Moreover, the latest expansion of housing activity was the fastest since January. Work on civil engineering projects also picked up at a robust pace in December, while commercial construction increased only marginally.
Simon Gregory, MD of Lindum Construction and Executive Board Director, said: “We have seen an increase in the number of affordable housing projects being confirmed at the end of last year and at the beginning of this year, which is evidence of increased confidence and commitment in this particular sector.
“However, this increase in confidence may not be represented across all sectors.
“It is true to say that we are experiencing increased upward pressure on material and labour prices and also extended supply times for deliveries of, for example, bricks and roof tiles which is something we have to manage working in partnership with our clients and suppliers.”