Autumn Statement: construction sector confidence nosedives as project costs rise

The Chancellor faces a fall in construction activity and higher project costs as he considers a fiscal stimulus in infrastructure to protect the economy from the impact of the vote to leave the European Union.

A survey of purchasing managers in construction firms suggests declining confidence in growth prospects despite an increase in activity in October. The IHS Markit construction Purchasing Managers Index suggested that the rate of growth was "only modest and still much softer than the average since the recovery began three-and-a-half years ago". Civil engineering activity was the weakest category of the construction sector, with a decline in work in the month.

Falling confidence was linked to the cost of raw materials such as oil increasing at the second-fastest rate since July 2011, exceeded only by the rise in costs reported in August. Anecdotal evidence suggested that suppliers had sought to pass on higher imported raw material prices following the sharp depreciation of sterling against the US dollar and euro. Some construction companies also pointed to greater transportation costs in October.