Construction growth slows due to 'widespread' disruptions

6 September 2021

"Formidable" supply chain pressures have led to steep input price rises for construction firms, according to the latest PMI. 

The IHS Markit/CIPS UK Construction Purchasing Managers' Index (PMI) fell to 55.2 in August, down from 58 in July.

While this was above the 50-point threshold that signals expansion, August saw the slowest growth since February as the impact of shortages took its toll on the construction industry. 

Usamah Bhatti, economist at IHS Markit noted the impact of supply chain disruptions were “widespread” throughout the third quarter of 2021.

Bhatti said: "Supply chain disruption continued to disrupt activity across the UK construction sector, as demand for materials and logistics capacity outstripped supply. 

“Average vendor performance continued to deteriorate at a near-survey record rate, as firms noted severe shortages of building materials, a lack of available transport capacity and long wait times for items from abroad due to port congestion.”

The survey found strong rises in demand for construction materials continued to stretch supply chains, as some firms noted difficulty in sourcing and receiving purchased inputs. 

Input cost inflation accelerated to the second highest rate in the survey’s 24-year history, surpassed only by the steep acceleration in costs that occurred in June this year.

The survey found concrete, fuel, steel and timber were the most commonly-reported for price increases. 

Duncan Brock, group director at CIPS, said: "Formidable supply chain pressures restrained purchasing activity and building projects across the board in August as 68% of construction companies reported even longer delivery times for materials compared to July. 

“A combination of ongoing Covid restrictions, Brexit delays and shipping hold-ups were responsible as builders were unable to complete some of the pipelines of work knocking on their door.”

Brock said material and staff costs “went through the roof” due to the impact of labour shortages. 

Increases in wages in a bid to attract workers coupled with low stocks of materials at suppliers led to inflation pressures, and 84% of supply chain managers reported paying more for purchases.

Brock continued: "These obstacles to construction’s progress are set to continue and are now affecting last year’s strongest performer – house building, which will exacerbate the problem of housing supply. However, optimism improved on last month as more than half of building firms believe that output will continue to rise in the year ahead."

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