Warning: Division by zero in /home/customer/www/buildingmagazine.co.uk/public_html/wp-content/plugins/bertha-ai/classes/class-bertha-ai.php on line 429
Recovery in UK construction continues to grow | BUILDING MAGAZINE

Recovery in UK construction continues to grow

According to the latest survey of construction purchasing managers, the recovery in UK construction output continues to grow.

Overall construction activity expanded at the fastest pace since June 1997, supported by another sharp rise in new orders.

Materials shortages however, meant that suppliers’ delivery times lengthened to the greatest extent since the survey began just over 24 years ago, and passed the previous record seen in April 2020. The shortages resulted in a survey-record rise in purchasing prices in June.

At 66.3 in June, up from 64.2 in May, the seasonally adjusted IHS Markit / CIPS UK Construction PMI Total Activity Index signalled the strongest rate of output growth for exactly 24 years. Sharp increases in business activity were seen across all three main areas of the construction sector monitored by the survey – house-building, commercial construction and civil engineering.

Construction work in house-building, scoring 68.2, increased at the fastest pace since November 2003.

Commercial work scored 66.9, with output rising at the strongest rate since March 1998. Civil engineering activity rose sharply in June, but its score of 60.7 represents slower growth than in the previous couple of months.

Survey respondents widely commented on a rapid turnaround in demand for new construction work, especially residential building and commercial projects related to the reopening of the UK economy. Total new orders have increased in each of the past 13 months, although the latest expansion in new orders was slower than May’s survey-record high.

Construction companies also reported another month of sharply rising employment numbers. The rate of job creation was not quite as high as in May but remained among the fastest seen over the past seven years. Moreover, subcontractor usage increased at the steepest pace since the survey began in April 1997.

Approximately 77% of the survey panel reported longer lead times from suppliers in June. The seasonally adjusted index pointed to the worst month for supplier delays since the survey began. Construction companies overwhelmingly cited stock shortages among vendors, reflecting severe delays with shipping and haulage, especially for products sourced from within the EU. In terms of building materials, panel members commented on short supply across the board, particularly cement, concrete, plaster, steel, timber and roof tiles.

This resulted in rapid cost inflation and average prices paid for products and materials increased at survey-record pace. Adding to cost pressures in June was the steepest rise in rates charged by subcontractors since the survey began.

Construction companies remain optimistic about growth prospects for the next 12 month. That said, the degree of confidence eased to its lowest since January, reflecting in part to concerns about labour availability and the sustainability of the recent surge in demand.

Economics director at IHS Markit, which compiles the survey, Tim Moore, said: “June data signalled another rapid increase in UK construction output as housing, commercial and civil engineering activity all expanded at a brisk pace. The headline index signalled the fastest rise in business activity across the construction sector for 24 years. Total new orders expanded at one of the strongest rates since the summer of 2007, mostly reflecting a strong and healthy demand for residential projects and a boost to commercial work from the reopening of the UK economy”

“Supply chains still struggled to keep up with demand for construction products and materials, with lead times lengthening to the greatest extend since the survey began in April 1997. Survey respondents widely reported delays due to low stocks of building materials, shortages of transport capacity and long wait times for items sourced from abroad”.

“Purchasing prices and sub-contractor charges both increased at survey-record pace in June, fuelled by supply shortages across the construction sector. Escalating cost pressures and concerns about labour availability appear to have constrained business optimism at some building firms. The degree of positive sentiment towards the year ahead growth outlook remained high, but eased to its lowest since the beginning of 2021”.

Group director at the Chartered Institute of Procurement & Supply, Duncan Brock, said: “A wave of new orders overwhelmed supply chains again this month where stock levels could not keep up with building work accelerating at the fastest rate since June 1997”.

“The meagre availability of raw materials placed obstacles in the path of stronger workflows where supplier delivery times extended into record-breaking territory once again and surpassed the height of disruption when the pandemic first hit”.

“A lack of delivery drivers and logistics difficulties for EU imports left stock undelivered or unavailable and construction companies waited while costs mounted. Construction’s heavy load remains inflation rising to its highest rate since April 197 as a staggering 86% of respondents reported paying more for their goods in June”.

“These malfunctions in supply chain performance may be a global issue but this doesn’t help UK builders who are ready but unable to return fully to projects, which was reflected in the lowest optimism since January. This surge in activity will lose momentum while labour availability along with key materials remain elusive”.

Finance director at construction contractor Beard, FraserJohns, said: “The UK construction PMI report is really a tale of two parts. In June we saw activity grow at the fastest pace since 1997, led by a wave of new orders which have increased month-on-month. At the same time, however, delays in the supply chain were at their worst for 24 years, and prices soared at the fastest rate since the survey began”.

“The well-reported materials shortages are really starting to bite across the UK where contractors are waiting for supplies, while watching prices rise. It is little wonder that confidence in the sector has slumped back to levels last seen inJanuary”.

“Given the pressure from the increase in new orders, which is what we all wanted to see following the decline last year, there is a real danger of the sector overheating. With the summer holidays expected to see labour shortages as foreign workers head home for the first time in months, this situation is likely to get worse before it gets better”.

“As such, it is vital for the sector to take a more proactive and collaborative approach with customers and supply chains, to try to mitigate against the risk of delays impacting projects onsite”