UK construction sector growth slows amid supply chain pressures

Will Green is news editor of Supply Management
5 January 2015

The UK construction sector expanded at its slowest pace for 17 months in December against a background of concerns around supply chain pressures and skills shortages, according to a survey of buyers.

The Markit/CIPS UK Construction Purchasing Managers’ Index posted 57.6 in December, down from 59.4 in November, but still above the long-term average (54.5) and the no-change position of 50.

Residential house building was the strongest performing sub-category, while civil engineering slipped into contraction for the first time in 17 months.

The rate of staff recruitment was above average in December but a number of firms reported worsening skills shortages, reflected in decreased subcontractor availability and increased pay for them.

More than half of firms predicted a rise in business activity during 2015, against 13 per cent who forecast a reduction, but uncertainty over this year's General Election weighed on confidence.

Cost inflation fell to its lowest for seven months, helped by falling oil-related prices, yet strong supply chain pressures persisted with vendor performance continuing to deteriorate.

David Noble, group CEO, CIPS, said: “The sector is still expanding with the index posting at a higher level than the longer-term average, and led primarily by residential development, but it has become a victim of its own success as it struggles to keep up with its own speed of recovery.

“With increases in new business comes pressure on the availability of talented staff and a squeeze on the performance of supply chains.”

Tim Moore, senior economist at Markit, said: “Four times as many construction companies anticipate an upturn in output over the year ahead as those that expect a reduction. Positive sentiment was linked to strong pipelines of work-in-hand and favourable underlying business conditions. However, concerns related to supply chain pressures and deepening skill shortages were prevalent among survey respondents in December.”

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