Growth slows for construction firms amid pressure over supplies

The UK's builders are struggling to keep up with a recent spike in demand and have been left low on supplies, according to an influential survey.

The pressures have helped push the country's construction sector off the 24-year highs it saw earlier this year. According to the latest IHS Markit/Chartered Institute of Procurement & Supply (Cips) UK construction purchasing managers' index (PMI), the sector hit a score of 58.7 in July.

That still represents growth – anything above 50 is considered positive – but is a big step down from June's 66.3 – the highest in more than a generation. It is also the slowest growth in any month since February.

More than eight in ten businesses said they had seen prices for raw materials and other costs rise over the period. Only one in 100 said costs fell in July.

The IHS Markit/Cips UK construction PMI reached a score of 58.7 in July. Picture: Justin Tallis/AFP via Getty Images.

Not only have prices gone up, some companies are even struggling to find the materials they need, which has slowed down the sector. Two thirds of businesses said they had to wait longer for deliveries, putting this down to Brexit friction, congestion at ports, and a shortage of transport.

Tim Moore, economics director at IHS Markit, said: "July data marked the first real slowdown in the construction recovery since the lockdown at the start of this year.

"It was unsurprising that UK construction companies were unable to maintain output growth at the 24-year high seen in June, especially with widespread supply shortages and constrained capacity to take on additional orders.

"The loss of momentum spanned all major categories of construction work and was most pronounced in the housebuilding sector."

Cips group director Duncan Brock said: “Suppliers did better to meet orders in July than in June. But this was in part because companies were not ordering products that they knew would not arrive on time.

"Faced with transport disruptions, shortages of essentials and Brexit delays, the initial spurt of activity this year is fast hitting the rocks. Building optimism was dampened to the lowest since January as it is difficult to foresee when all these challenges are likely to subside."

Hurdles

Gareth Belsham, director of national property consultancy and surveyor Naismiths, said: “This is the clearest evidence yet that the construction industry’s supply chain problems are more than mere speed bumps.

“These problems aren’t just slicing into contractors’ margins, they’re now constraining output too. While overall construction industry growth remains strong, especially in the red-hot housebuilding sector, the rate of expansion has cooled sharply.

“Total output is now back down to the levels seen in February, during the depths of the UK’s last lockdown. As a result, business confidence has also taken a knock, slipping to a six-month low.

“Cool heads in the industry have seen this all before, and pragmatic builders and their clients are recalibrating prices and schedules and getting on with it.

“But there is still the nagging question about the current runaway material cost inflation; is it a short-term blip or are we facing a long-haul of rising prices? The jury is still out on that one.”

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