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UK construction sector hit by shortage of materials and staff

·Business Reporter, Yahoo Finance UK
·3 min read
UK construction sector hit by shortage of materials and staff
The squeeze was felt in both civil engineering and housebuilding — the latter fell to its lowest reading since May 2020. Photo: Owen Humphreys/PA via Getty

Growth in the UK construction industry slowed in September as shortages of material and labour continued to wreak havoc.

According to IHS Markit and CIPS, output growth eased for the third consecutive month, with a rapid drop in sub-contractor availability over the period. This included shortages of bricklayers, drivers, groundworkers, joiners, plumbers and many other skilled trades.

Imbalanced demand and supply contributed to the steepest rise in sub-contractor charges since the survey began in April 1997, the data showed.

The construction PMI index fell to 52.6 last month, down from 55.2 in August — the lowest reading since January. A Reuters poll of economists had pointed to a reading of 54.0.

Any reading over 50 indicates growth.

Chart: IHS Markit, CIPS
The construction PMI index fell to 52.6 last month, down from 55.2 in August. Chart: IHS Markit, CIPS

The squeeze was felt in both civil engineering and housebuilding, where the index dropped to 51 from 54.8, and 52.8 from 55, respectively. The reading for housebuilding was the lowest since May 2020.

September data indicated another strong rise in employment numbers across the construction sector, driven by greater workloads and stretched business capacity.

However, the latest rise in staffing levels was the least marked since April, which partly reflected long wait times to fill vacancies, IHS Markit said.

Read more: UK service sector growth slows amid staff shortages and supply chain disruption

The latest survey showed that construction firms remained highly upbeat about the business outlook. Just over half (51%) forecast rising output, while only 8% anticipate a decline.

But the degree of confidence was weaker than in August amid some concerns that the supply chain crisis will hinder growth.

“September data highlighted a severe loss of momentum for the construction sector as labour shortages and the supply chain crisis combined to disrupt activity on site,” Tim Moore, director at IHS Markit, said.

Watch: Army Starts Fuel Deliveries Amid UK Supply Disruption

“The volatile price and supply environment has started to hinder new business intakes as construction companies revised cost projections and some clients delayed decisions on contract awards.”

It came as German industrial orders tumbled 7.7% in August amid supply chain bottlenecks and ongoing shortages.

Europe’s largest economy, which is heavily reliant on manufacturing, suffered during the month after two months of strong gains. The figures came in much worse than the 2.1% fall which analysts expected.

Car and car part manufacturers were the worst hit, with orders down 12% on the previous month.

Max Jones, director in Lloyds Bank’s infrastructure and construction team, said: “October will be a litmus test of which contractors can stand on their own two feet without the safety net of government support.

“What will become clear as we approach the end of the year is how well firms managed throughout the pandemic and which ones are best placed to weather the headwinds that will affect the wider economy and will reap the rewards of continued high levels of demand.”

Watch: Why supply chain issues have not gone away