Record-breaking price rises for construction

Will Green is news editor of Supply Management
6 July 2021

The construction sector saw record-breaking price rises for products and materials in June, according to the latest PMI.

Supplier lead times lengthened to the greatest extent since the survey began just over 24 years ago amid severe stock shortages and shipping and haulage delays.

The IHS Markit/CIPS UK Construction Purchasing Managers’ Index climbed to 66.3 in June, up on 64.2 in May and against the neutral 50 reading, which signals neither contraction nor expansion.

Eight in 10 (77%) survey respondents reported longer supplier lead times and short supplies across the board, especially products sourced from the EU. Firms highlighted shortages of cement, concrete, plaster, steel, timber, and roof tiles.

Adding to cost pressures was the steepest rise in rates charged by subcontractors since the survey began.

Companies remained optimistic about growth prospects for the next 12 months, but the degree of confidence dropped to its lowest since January, in part reflecting concerns about labour supply and the sustainability of the demand surge.

Overall construction activity expanded at the fastest pace since June 1997, with house building and commercial projects performing particularly well, supported by another sharp rise in new orders.

Duncan Brock, group director at CIPs, said growth would lose momentum while labour and goods availability remained an issue.

“The meagre availability of raw materials placed obstacles in the path of stronger workflows where supplier delivery times extended into record-breaking territory once again and surpassed the height of disruption when the pandemic first hit,” he said.

“A lack of delivery drivers and logistics difficulties for EU imports left stock undelivered or unavailable and construction companies waited while costs mounted.

“Construction’s heavy load remains inflation, rising to its highest rate since April 1997 as a staggering 86% of respondents reported paying more for their goods in June.”

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