Buyers report 24-year-high in construction output growth

The bellwether IHS Markit/CIPS UK Construction PMI Total Activity Index hit 66.3 in June, up from 64.2 in May, to record the strongest rate of growth for 24 years.

But materials shortages saw suppliers’ delivery times length to the greatest extent since the survey began as price increases hit record levels.

Tim Moore, Economics Director at IHS Markit, said: “June data signalled another rapid increase in UK construction output as housing, commercial and civil engineering activity all expanded at a brisk pace.

“Total new orders expanded at one of the strongest rates since the summer of 2007, mostly reflecting robust demand for residential projects and a boost to commercial work from the reopening UK economy.

“Supply chains once again struggled to keep up with demand for construction products and materials, with lead times lengthening to the greatest extent since the survey began in April 1997. Survey respondents widely reported delays due to low stocks of building materials, shortages of transport capacity and long wait times for items sourced from abroad.

“Purchasing prices and sub-contractor charges both increased at a survey-record pace in June, fuelled by supply shortages across the construction sector. Escalating cost pressures and concerns about labour availability appear to have constrained business optimism at some building firms. The degree of positive sentiment towards the year-ahead growth outlook remained high, but eased to its lowest since the start of 2021.”

Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply, added:”A wave of new orders overwhelmed supply chains again this month where stock levels could not keep up with building work accelerating at the fastest rate since June 1997.

“The meagre availability of raw materials placed obstacles in the path of stronger workflows where supplier delivery times extended into record-breaking territory once again and surpassed the height of disruption when the pandemic first hit.

“A lack of delivery drivers and logistics difficulties for EU imports left stock undelivered or unavailable and construction companies waited while costs mounted. Construction’s heavy load remains inflation rising to its highest rate since April 1997 as a staggering 86% of respondents reported paying more for their goods in June.

“These malfunctions in supply chain performance may be a global issue but this doesn’t help UK builders who are ready but unable to return fully to projects which was reflected in the lowest optimism since January. This surge in activity will lose momentum while labour availability along with key materials remain elusive.”

updated: 06/07/2021