Construction 'groans under weight' of supplier shortages

2 March 2017

UK construction sector growth rose in February but the rate of output growth remained weaker than its post-referendum peak of 54.2 in December 2016.

The Markit/CIPS UK Construction Purchasing Managers’ Index climbed to 52.5 in February, compared to 52.2 in January and above the neutral reading of 50 for the sixth consecutive month, following a contraction after the country voted to leave the EU.

Construction firms recorded a sustained expansion of overall business activity, with civil engineering replacing house building as the main growth driver.

Survey respondents noted that the resilient economic backdrop and stabilisation in client confidence since the EU referendum continued to help drive construction growth.

IHS Markit senior economist Tim Moore said: “February’s survey data highlights that the UK construction sector has rebounded from its post-referendum soft patch but remains on a relatively slow growth trajectory.”

Cost pressures remained at an eight-year high, which was overwhelmingly linked to higher prices for imported materials. 

Along with cost inflation, February’s slow growth trajectory was partly attributed to supply chain issues arising from material shortages, resulting in lengthened delivery times for bricks, blocks and roofing.

Duncan Brock, director of customer relations at CIPS said: “Suppliers were challenged this month as they groaned under the weight of high demand and some material shortages, with the sharpest drop in performance since June 2015. This impacted on the sector’s overall pace of activity.”

The housebuilding sector was also identified as being a key factor weighing down overall construction growth. 

Meanwhile, the survey revealed that commercial building declined for the first time since October 2016, while employment saw an increase despite a slowdown in new business to its weakest for four months.

Moore added: “Survey respondents mainly cited an underlying slowdown in sales growth, with the latest rise in new work the weakest for four months. In some cases, construction companies reported that sharply rising input prices had a disruptive impact on contract negotiations.”

Overall, the sector’s optimism remained high concerning growth prospects for the coming year, with 48% forecasting a rise in business activity and only 13% expecting a decline.

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