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Construction growth picks up despite contract delays – PMI

Growth picked up in the UK construction industry in October but uncertainties over supplies and prices held up new contracts, a survey showed.
The IHS Markit/CIPS UK construction purchasing managers’ index (PMI) rose to 54.6 from 52.6 a month earlier. A reading of 50 marks the difference between growth and contraction.

Housebuilding replaced commercial construction as the best-performing category with a score of 55.4 – the strongest reading for three months. Commercial work also picked up with respondents reporting a boost from looser pandemic restrictions. Civil engineering showed a modest increase.

Customer demand was strong but new orders failed to pick up from September’s eight-month low as supply shortages and rising costs made builders hesitant about signing contracts. Purchasing activity increased sharply as builders snapped up goods before projects started. Employment growth also picked up.

More than half the survey reported longer delivery times linked mainly to a shortage of haulage drivers and international shipping congestion. But construction firms reporting longer waiting times for deliveries fell to 63% from 77% in June, suggesting the worst of the delays might be over.

Input costs rose sharply but at a slower pace than in the previous six months. Cost increases were attributed to rising energy and commodity prices, raw material shortages and lack of transport.

The outlook was positive with 52% expecting output to increase and just 8% forecasting a decline. Optimism edged up despite concerns about shortages and costs.

IHS Markit director Tim Moore said: “The volatile price and supply environment added to business uncertainty and continued to impede contract negotiations. There were widespread reports that shortages of materials and staff had disrupted work on site, while rising fuel and energy prices added to pressure on costs. Nonetheless, the worst phase of the supply crunch may have passed.”

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