Construction supplier performance hits 14-year high in March

6 April 2023

Greater supply availability and fewer logistics bottlenecks helped construction vendor performance gain its strongest overall position since 2009, the March construction PMI has revealed.

UK construction output saw another rise in March, which the S&P Global/CIPS UK Construction PMI posted as a 50.7 score, which falls above the neutral 50.0 mark but below the 54.6 of February. This signalled a marginal overall increase in total construction output.

The rise was due to a moderate increase in new orders, but the biggest contributing factor was significantly improved supply conditions. Together, the better supply of construction products and materials with fewer logistical bottlenecks meant vendor performance saw its strongest improvement since November 2009.

Civil engineering was the fastest growing segment, with survey respondents citing a boost from HS2 infrastructure projects and strong demand for transport-related projects.

Mneanwhile, housebuilding was the weakest performing segment for the fourth month in a row. March marked the fastest rate of decline for the segment since May 2020, as survey respondents cited fewer tender opportunities due to rising borrowing costs, and thus fewer housing projects.

Some construction companies said the improved supply conditions had encouraged them to run down inventories, and noted the increased vendor performance was largely thanks to a better balance between demand and supply.

Improved supply conditions failed to offset input prices, however, which continued to rise sharply in the face of elevated energy costs and rising staff wages. 

In a positive outlook, just under half (46%) of the survey panel predicted an increase business activity for the year ahead, while only 11% predicted a reduction. This made for the strongest business optimism since February 2022, marking a turnaround in client spending and a more favourable outlook for the wider UK economy.

CIPS chief economist Dr John Glen said: “Delivery times from suppliers improved at the fastest rate since November 2009 as stocks were unravelled and fewer orders from supply chain managers meant goods got through more quickly. Builders were also riding high with the highest levels of optimism since February 2022 and there was an uplift in hiring levels to maintain momentum. 

“Strong inflationary pressures remained an obstacle to wider expansion at building companies, however, along with concerns over consumer affordability rates. With residential building still struggling and falling at the fastest rate since May 2020, it was the bigger projects like HS2 managed by the civil engineering sector that added fuel to the engine of construction growth this month.”

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