The boost is being driven by the recovery in housebuilding but yesterday’s report by Markit and the Chartered Institute of Purchasing & Supply (Cips) also showed an increase in commercial building and civil engineering work.
The latest purchasing managers’ index (PMI) on the sector showed a bigger-than-expected jump to 64 in August, from 62.4 in July – indicating one of the sharpest rises in output for seven years.
Construction firms hired staff at “a strong rate” while at the same time the use of sub-contractors grew at the fastest rate since the survey began in 2007.
Cips chief executive David Noble said the construction sector’s longest run of employment growth since the recession was revealing a major skills shortage that was already pushing up prices.
He said August saw the quality of sub-contracted work deteriorate at the fastest rate since the survey began in 1997, alongside a record reduction in the availability of sub-contractors and a record rise in the rates charged.
Noble said: “The sector is struggling to find enough skilled tradesmen to keep pace with new work, and the labour market will continue to put pressure on costs until the next wave of apprentices begin to enter the jobs market.”
Across the supply chain, delivery times also saw the sharpest rise since the survey began, with input prices growing at the fastest rate since July 2011. Noble said suppliers, who had to make cutbacks during the recent lean years, were struggling to ramp up production to pre-crisis levels.
“The resurgence in construction has retrenched itself after a summer of blistering growth but builders should prepare for growing pains this autumn as the sector labours to recover lost capacity,” he said.
Tim Moore, senior economist at Markit and author of the PMI report, said that while many firms were confident that supplier capacity was due to increase as new facilities came online, they were less sanguine about their recruitment difficulties.
Cips said residential construction posted the fastest rise in activity in August, despite the pace of expansion moderating slightly to a three-month low.
Civil engineering activity increased at the strongest pace since March, while growth in commercial construction was again near to its fastest since the summer of 2007.
Jeremy Cook, chief economist at currency exchange company World First, said: “It is a good time to be working in construction if you have the skill-set. Gains appear to have been made across all three divisions of the sector, driving confidence higher still.
“According to the survey, eight times as many firms believe that the sector will continue expanding over the year ahead as opposed to seeing declines.
“Price data was also strong, with input inflation expanding at the strongest levels since July 2011 – good news for margins in the short term, but a continuation is contingent on reliable progression onward.”
The survey will fuel speculation that the Bank of England will raise interest rates soon, as policymakers are specifically targeting “spare capacity” in the labour market as an indicator of inflation to come.
The Bank’s nine-member monetary policy committee is meeting this week but no changes are expected to be announced tomorrow.