'Brakes off' for UK construction

Will Green is news editor of Supply Management
3 July 2018

New orders in the UK construction sector rose in June at the fastest pace since May 2017, according to the latest PMI.

Survey respondents reported improved client demand, with residential work remaining the best performing area but commercial building expanding at the fastest pace since February. Civil engineering growth eased to a three-month low.

The IHS Markit/CIPS UK Construction Purchasing Managers’ Index rose to 53.1 in June, up on 52.5 in May and against the no-change reading of 50, signalling the sharpest overall rise in construction output since November 2017.

Duncan Brock, group director at CIPS, said: “With the fastest rise in new orders since May 2017, it appears the brakes are off for the construction sector. Despite being hampered by economic uncertainty, firms reported an improved pipeline of work as clients committed to projects and hesitancy was swept away.

“Input prices were a challenge with the biggest inflationary rise since September 2017, so the pressure was on to build up stocks of materials rising in price and becoming more scarce. This resulted in a heavy impact on suppliers unable to keep pace as deliveries became laboured and purchasing managers were at their busiest for two and a half years.”

The rise in input buying was the steepest since December 2015, with firms noting this reflected new project starts and forward purchasing of stocks to mitigate forthcoming price rises.

Input prices increased at the sharpest pace for nine months, attributed to transportation costs and higher prices for metals, particularly steel. Vendor lead times lengthened again in June, driven by low stocks and supplier capacity constraints.

Brock said: “Housing continued on its positive trajectory for a fifth month and commercial activity also improved after a weak start to the second quarter. However, before we bring out the bunting, the sector is not out of the woods yet and there needs to be further sustainable activity to be convincing. A cloud of uncertainty remains, given the sector’s hit and miss performance so far this year and lower than average business confidence in June.”

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