Subcontractor costs rise at record pace

Will Green is news editor of Supply Management
7 October 2021

A shortage of subcontractors contributed to rising cost burdens for UK construction firms in September, according to the latest PMI.

The squeeze on labour supply led to rates charged for subcontracted work increasing at the fastest pace since the survey began in 1997.

The IHS Markit/CIPS UK Construction Purchasing Managers’ Index slipped to 52.6 in September, down on 55.2 in August and against the no-change reading of 50.

The slowdown was linked to a combination of supply chain issues, including unavailable transport and a severe lack of materials, and softer demand.

All three categories of construction – housebuilding, commercial, and civil engineering – saw a loss of momentum but civil engineering saw the biggest slowdown.

Purchas prices increased rapidly but the rate of inflation eased further from June’s all-time peak, with 78% of survey respondents reporting a rise in cost burdens.

Just over half (51%) of firms forecast rising output over the next 12 months, while just 8% predicted a decline, but the degree of confidence was weaker than August amid concerns the supply chain crisis will hinder growth.

Duncan Brock, group director at CIPS, said: “Construction activity suffered another setback in September, as builders were hammered by staff and material shortages, delivery delays and higher business costs as this phase of the post-pandemic recovery became the shakiest for eight months.”

Tim Moore, director at IHS Markit, said: “Shortages of building materials and a lack of transport capacity led to another rapid increase in purchase prices during September.

“There was also a considerable decline in the availability of subcontractors, with survey respondents citing shortages of bricklayers, drivers, groundworkers, joiners, plumbers and many other skilled trades. Measured overall, prices charged by subcontractors increased at the fastest rate since the survey began in April 1997.”

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