British construction firms witnessed an unprecedented rise in cost inflation in March, marking the sharpest month-on-month increase since records began in 1997, according to a survey released on Wednesday.
Data from S&P Global showed that the UK Construction Purchasing Managers’ Index (PMI) measure of input cost inflation jumped to 70.5 in March, up from 59.5 in February.
This also represents the highest level recorded since November 2022.
The surge highlights intensifying cost pressures across the sector, adding to existing economic concerns.
The rise follows similar trends observed in other industries, with British manufacturers reporting the steepest monthly increase in cost burdens since October 1992 just last week.
Weak demand and falling new orders
The sector also faced a notable decline in demand. New orders dropped at the fastest pace since November last year, reflecting weakening business activity.
At the same time, earlier signs of optimism regarding future output among construction firms have diminished, indicating a cautious outlook.
S&P Global’s headline construction PMI remained below the critical 50.0 threshold, which separates growth from contraction for the 15th consecutive month.
However, the index edged slightly higher to 45.6 in March from 44.5 in February, suggesting a marginal easing in the pace of contraction rather than a recovery.
Recent official figures offered a somewhat mixed picture of the sector’s performance.
Construction output rose by 0.2% in January, following a 2% contraction in the final quarter of 2025.
While the modest increase indicates some stabilisation, it has not been sufficient to offset broader weakness in demand and rising cost pressures.
Supply chain disruptions and economic pressures
According to Tim Moore, economics director at S&P Global Market Intelligence, certain segments, such as infrastructure, particularly energy-related projects, showed signs of improvement.
However, he noted that the overall near-term outlook for the sector remains challenging.
Businesses are increasingly concerned about rising inflation, weak economic prospects, and higher borrowing costs.
Additionally, supply chain conditions deteriorated for the first time since mid-2025.
This was largely attributed to shipping delays linked to disruptions in the Strait of Hormuz, which have slowed material deliveries and increased operational uncertainty.
Impact of the Iran conflict
The ongoing conflict involving Iran has further compounded difficulties for the construction sector, affecting both confidence and demand.
The impact has not been limited to construction alone.
The all-sector PMI, which combines data from manufacturing and services, fell sharply to 49.9 in March, down from 52.9 in February.
This marks its lowest level since September and signals a broader slowdown in business activity across the UK economy.
Together, these indicators point to a sector under sustained pressure, with cost inflation, geopolitical tensions, and weakening demand continuing to weigh heavily on construction firms.
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