Construction production loses momentum as the availability of subcontractors hampers progress
Rthe resumption of construction production in the UK has lost momentum since June, as the sector struggled to keep pace with the recent surge in construction demand
projects, in particular due to shortages in the supply of raw materials and the decrease in the availability of subcontractors.
Latest results for the IHS Markit / CIPS UK Construction Total Activity PMI Index recorded 58.7 in July – down sharply from June’s 24-year high of 66.3 but still well above the crucial 50.0 line with no change. The latest reading signaled the slowest overall increase in construction production since February.
With request for construction materials keep on going To get ahead of supply, latest data points to another sharp increase in the purchase prices. About 81% of the survey panel said an increase in their average cost charges in July, when only 1% reported a decline.
lodge building has been the the most efficient Category in July (index at 60.3), followed closely by commercial building (59.2). In both cases, the rate of expansion was the lowest since February. This mainly reflected a stretched trade capacity and growth constraints due to supply problems, but some companies noted that the peak in customer demand after the lockdown had started to decline.
The Civil Engineering activity (55.0) followed the observed dynamic elsewhere in the construction sector in July, with growth down sharply since June and to its lowest for five months.
Total order books continued to improve in July, but the latest the increase in job creation was the smallest since March. Likewise, the entrance purchases increased at the slowest pace since April against a backdrop of recovery in request. Construction companies also Noted that the reduced availability of materials had slowed down purchase volumes in July.
About 66% of the survey panel reported longer wait times for supplier deliveries in July, while only 2% reported a improvement in seller performance. the resulting index reported widespread supply chain delays, even if the latest reading was up from June record low and high for three months. Survey respondents noted that the offer the imbalances have been amplified by a lack of transport availability, port congestion and Brexit-related trade frictions.
Rapid inflation in input costs continued in July, fueled by by supply shortages and robust request for construction elements. Higher costs for subcontractors and difficulties the filling of vacancies also exacerbated the pressure on prices. The last the decline in the availability of subcontractors was the second fastest since the start of the survey in 1997, exceeded only by that observed during containment in April 2020.
Finally, construction companies continued to hire staff at a pace, reflecting rising orders and confidence short term perspectives. While optimism towards to come up production growth has remained historically high, the index has fallen to its lowest for six months in July.
Tim Moore, Economic Director at IHS Markit, said: âLong delivery times for materials and reduced availability of subcontractors were cited as factors hampering work on site.
âAbout two-thirds of the survey panel experienced longer wait times for supplier deliveries in July, while only 2% reported an improvement over the previous month.
âThe July data marked the first real slowdown in the construction recovery since the lockdown earlier this year. It was no surprise that UK construction companies were unable to keep output growth at the 24-year high seen in June, especially with widespread supply shortages and limited capacity to take additional orders. “
Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply, added: âWidespread weaknesses in supply chains as well as the lack of availability of staff and contractors have been exposed as construction has lost some of its momentum.
âThe galloping rise in the prices of raw materials and transport continued to be the heavy load on construction with historically long delivery times.
âWhile there was a slight improvement in supplier performance from the record low in June, this was in part due to the frustration of supply chain managers restricting purchases that would not arrive. probably not in due time.
âNor have companies been able to increase staff capacity, where even the most prolific hiring spells since 2014 were insufficient for builders’ ability to finish the job on hand.
âFaced with transport disruptions, a shortage of essentials and Brexit delays, this year’s first surge in activity is quickly hitting the rocks.
“Building optimism has been reduced to its lowest since January as it’s hard to predict when all of these challenges are likely to subside.”