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Construction output rose at the fastest rate for eight months in February despite optimism about the months ahead declining.

The latest IHS Markit/CIPS survey of construction companies showed total output improving to 59.1% in February, the highest figure since last June.

Housing output rose from 54.3% in January to 61.5%, overtaking commercial activity 鈥� which recorded 58.4% 鈥� as the sector with the highest output. Civil engineering activity also rose from 53.2% to 57.5% month-on-month, its highest level since last June.

However, the survey also revealed that the industry is less optimistic than previously about output increasing over the year ahead, with firms citing the 鈥渋mpact of rising costs and supply shortages鈥�.

A total of 48% of the 150-strong panel forecast increased activity for the rest of this year, the lowest figure since January 2021. Only 9% predicted a fall however.

Usamah Bhatti, economist at IHS Markit, said: 鈥淒espite continued volatility in price and supply conditions, the overall rate of new order growth accelerated from January to reach the fastest since last August as client confidence improved in line with economic activity as plan B restrictions were fully lifted.

鈥淣onetheless, widespread reports of shortages of materials and labour continued to plague the UK construction sector, while rising input costs placed further strain on businesses.鈥�

Responding to the figures, Mark Robinson, group chief executive at Scape, said the growth in output was 鈥減roof the industry is back in its pre-pandemic groove鈥�. 

However, he added: 鈥淭he conflict in Ukraine and its impact on global energy prices will likely intensify the inflationary pressures, which adds another worry for project delivery at a crucial time 鈥� when the construction sector is gearing up for its busy spring and summer season.

鈥淚t鈥檚 important that contractors closely monitor the health of their supply chain and help them navigate effects of increasing costs, particularly through early engagement and constant dialogue.鈥�

Brendan Sharkey, head of construction and real estate at MHA, said construction has 鈥済ot a good wind in it sails鈥� but also said inflation remained a 鈥渞eal menace鈥�.

>> See also: Digitisation of projects can ease pain of higher materials costs

He added: 鈥淭he ultimate cause of the kind of inflation the sector dreads is the rising price of energy with oil and liquefied natural gas (LNG) prices now sky high. As margins are thin in the construction sector, there is a real prospect inflationary pressures, without proper controls, will put an end to some businesses.

鈥淏rexit was a trauma for the sector, but people have now adapted to an extent to the new environment. Businesses are paying more attention to their supply chains and understand the need for diversification more than they did.

鈥漈his means the sector might be slightly better placed to weather disruption flowing from the Russian invasion of Ukraine than it would have been had Brexit not happened.鈥�

Max Jones, a director in Lloyds Bank鈥檚 infrastructure and construction team, said: 鈥淭he sector is not without challenges. Many firms are building in contingency plans for the cladding taxes on residential work that come into force in April, while continuing to invest in ESG, including new technologies and recycling capabilities.

鈥漁verall, there is a sense among contractors that they have weathered the economic storms of the past two years well, but there will still be obstacles to overcome in the coming months.鈥�