The construction industry’s recovery from the pandemic continued to cool in the past month as material shortages and problems getting truckers once again slowed production in the sector.
The latest PMI data from IHS Markit and CIPS said total activity for August was 55.2, down from 58.7 the previous month and down more than 11 points from the 66.3 figure in June, a 24- Year high that increasingly looks like a one-off score.
It was the fifteenth straight month that production had increased, but the increase was the slowest growth since February as companies had persistent problems sourcing and then shipping materials due to the shortage of truck drivers and other freight-related issues Transport construction site like traffic jams in ports.
The survey found that material costs had risen at the second fastest rate in its 24-year history, with concrete, steel, and wood all seeing sharp increases, and labor costs also went north.
Commercial works performed best with a score of 56, followed by housing with 55, while civil engineering lagged for the fourth month in a row with a score of 54.8.
Jan Crosby, Head of Building and Infrastructure at KPMG, said: “A perfect storm continues to hamper the availability of materials and manpower across the UK sector. The industry tells us that this is one of their top concerns right now and that delays in the supply chain are preventing them from accepting new contracts to grow their construction business at a time when the economy is recovering.
“The ongoing shortage of truck drivers and the lack of inventory mean these concerns between supply and demand are not going away anytime soon.”
He added that HS2 is also gobbling up supplies of cement and construction equipment, while locations in the south, particularly London, have been hit by the impact of Brexit and the brain drain.
And Max Jones, a director on Lloyds Bank’s infrastructure and construction team, said the problems again highlight the purchasing power of larger companies versus their smaller competitors.
“Contractors’ trust is threatened by the dual concern about labor and material shortages. While the former is currently on the margins, supply issues mean those with larger bags are buying up supplies months in advance, leaving less for the here and now for the rest of the industry.
“Those with strong balance sheets are more robust when bidding for orders and can thus secure better margins.”
The survey found that customers had also been terrified by the volatility in material prices, and Fraser Johns, the finance director of regional contractor Beard, with sales of $ 135 million, feels the uncertainty about deliveries from the wave of optimism in late 2020 through to the first quarter of this year far away.
“We don’t look like we’re going to be around the corner in the supply crisis anytime soon, so it’s critical for the industry to pull together and work together across the supply chain to understand the impact of these issues to decrease.”
Despite the troubles, however, companies remained optimistic about the coming year, more than confident that production will continue to rise over the next 12 months as more public programs come into operation, as well as the ongoing real estate boom and increase in infrastructure work.