Construction buyers 'spinning plates' to source stock

4 March 2021

UK construction companies shook off a tough start to 2021 with a solid return to growth in February, according to the latest PMI.

New construction orders began to pick up as clients anticipated improved economic conditions in the UK.

However vendors continue to struggle with transport delays and strong demand conditions, resulting in extended supplier lead times.

Cost burdens across the construction sector rose at their fastest since August 2008 due to stretched global supply chains, greater shipping charges and rising commodity prices.

The IHS Markit/CIPS UK Construction Purchasing Managers' Index posted 53.3 in February, up from 49.2 in January. It has been above the threshold 50 no-change mark for eight of the last nine months.

The strongest area of growth continued to be residential work, though the speed of growth was slightly slower than in January.

Some respondents reported temporary delays on site as a result of adverse weather conditions and supply chain issues, especially for timber.

However the sharpest rise in commercial work since last September, and a slower fall in civil engineering activity, offset the slowdown in house building.

Signs that the vaccine rollout will release pent-up demand led to the strongest degree of business optimism for over five years.

Respondents said some contract awards for commercial building that had been delayed earlier in the pandemic had been restarted. Others reported a boost from infrastructure work related to major transport projects.

Purchasing prices increased rapidly as firms saw an imbalance of demand and supply, partially due to higher transportation costs.

CIPS group director Duncan Brock said: “On the one hand, February saw a welcome rise in overall output in the construction sector as commercial projects in particular were woken from their slumber and purchasing levels rose across the board for the ninth month in a row.

“On the other hand, strong demand for products added pressure to already impaired supply chains as sellers battled with raw material shortages, and the costs of business rose at the fastest rate since August 2008.”

Brock added that while port disruptions continued to have an impact, it was to a lesser degree than in January, suggesting the worst of the squeeze due to Brexit may have eased.

“Supply chain managers found themselves spinning a number of plates with creative ways to get stock including sourcing more local supply,” he added.

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