Construction supply chains 'groaning at the seams'

posted by Lucy Patchett
7 January 2021

Construction supply chains were left “groaning at the seams” in December as port delays and increased purchasing heaped pressure on vendors, according to the latest PMI.

Business continued to grow for the seventh month in a row, as delayed work from early 2020 went ahead, but heightened demand for construction materials resulted in shortages and longer delivery times.

The IHS Markit/CIPS UK Construction Purchasing Managers' Index dipped to 54.6 in December, significantly above the 50.0 no-change threshold and close to November’s 54.7 six-year high.

Construction activity has been on the rise with house building and commercial work increasing during December, while civil engineering was the weakest-performing category with activity falling for the fourth time in the past five months.

Survey respondents said increases in timber and steel prices had inflated purchasing prices at the fastest rate since April 2019. 

Half of survey respondents forecast that construction business would grow over 2021, while only 10% anticipated a decline, indicating the strongest optimism in the last three years.

Tim Moore, economics director at IHS Markit, said: “Construction companies are hopeful that higher demand will broaden out beyond residential projects in the next 12 months, led by infrastructure spending and a potential rebound in new commercial work from the depressed levels seen during the pandemic.

"Transport delays and a lack of stock among suppliers were the main difficulties reported by UK construction firms at the end of 2020, which contributed to the fastest rise in purchasing prices for nearly two years."

Duncan Brock, group director at CIPS, said: "Further down the line, with purchasing growth close to its highest for six years, supply chains were groaning at the seams and delivery times increased to the most dramatic extent for six months.

"Once again residential building was the strongest sector and construction companies focused on this segment seem resilient for now. As the appetite for building resources grows in the first quarter of the year however, suppliers will find it difficult to ramp up production quickly to pre-pandemic levels, so we could see even longer delivery times potentially delaying some building projects as post-Brexit disruption also remains an ever-present threat."

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