Price and supply constraints weigh on construction firms

Will Green is news editor of Supply Management
4 March 2022

The rate of input cost inflation for construction companies dropped to an 11-month low in February, according to the latest PMI.

Increases in purchase prices were often attributed to rising raw material and commodity prices, supply shortages, and lack of transport capacity.

Around 36% of survey respondents reported longer delivery times among suppliers, linked to driver and material shortages and international shipping delays, but this was down on a peak of 77% in mid 2021.

The IHS Markit/CIPS UK Construction Purchasing Managers’ Index climbed to 59.1 in February, up on 56.3 in January and against the neutral reading of 50, representing the strongest growth for eight months.

House-building replaced commercial work as the best-performing category, while civil engineering expanded at the strongest pace since June 2021.

Duncan Brock, group director at CIPS, said: “Curbing inflation will continue to be a big issue for building firms who will be nervous about securing continuing supply and offsetting price rises to improve business margins, especially if costs continue their skyward trajectory.”

Usamah Bhatti, economist at IHS Markit, said: “It appears that the peak of price pressures has passed as the rate of input cost inflation eased for the sixth month in a row to reach the softest since last March.

“At the same time, reports of supplier delays were considerably lower than those seen in the middle of last year. Yet, price and supply constraints weighed on overall business confidence, which eased to the softest in just over a year.”

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