Lack of construction supply chain capacity 'could become roadblock to sustained growth'

Will Green is news editor of Supply Management
4 August 2014

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4 August 2014 | Will Green

The rate of job creation in the UK construction sector during July was the fastest in 17 years, according to a survey of buyers.

The Markit/CIPS UK Construction Purchasing Managers’ Index registered 62.4 July, slightly down on June’s four-month high of 62.6, but still indicating fast expansion against a baseline of 50, which indicates no change.

While the pace of job creation was the fastest since the survey began in April 1997, there was a further rapid lengthening of supplier delivery times.

Housing remained the best-performing sub-sector, with July’s rise in output the sharpest for more than a decade, but the expansion of overall construction activity was one of the fastest seen since 2007.

The survey indicated a reduction in subcontractor availability for the 13th month running, while rates charged by subcontractors rose at a near record pace.

Respondents reported low stocks and capacity shortages at suppliers and average cost burdens increased sharply, with input price inflation easing only slightly from June’s six-month high.

Tim Moore, senior economist at Markit, said: “Looking ahead, a pressing concern for construction companies is the availability of materials and suitably skilled labour to support the recent growth streak.

“Cuts to supplier capacity have ushered in the worst period of input delivery delays since the survey began, while this summer has also been notable for construction firms reporting near-record increases in rates commanded for subcontracted work.”

David Noble, group CEO, CIPS, said: “One concern is the strain on supply chains that could become a roadblock to sustained growth in the future. Construction firms reported the sharpest deterioration in the quality of subcontracted work since 1999, which combined with lengthening supplier delivery times could conspire to put the brakes on the sector’s growth.”

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