UK Construction PMI data for August shows construction recorded the “second-fastest rise in input prices amid severe supply chain disruption”, with FMB saying: “It’s vital that transparent allocation and pricing policies are implemented to help enable SMEs to have continued and stable access to materials”, whilst Naismiths asks “is it a blip, or will it start to impact not just the delivery of projects, but demand as well?”
The construction sector has responded to the latest IHS Markit / CIPS UK Construction PMI data which shows August saw “softer expansions across housebuilding, commercial work and civil engineering activity as well as new order growth”, plus period recorded the “second-fastest rise in input prices amid severe supply chain disruption.”
Focusing on the current issues around availability and pricing of construction materials, the Federation of Master Builders says these challenges are curtailing builders’ recovery from the pandemic and “transparent allocation and pricing policies” are required “to enable SMEs to have continued and stable access to materials.”
FMB Chief Executive Brian Berry explained: “Builders throughout the UK, particularly smaller firms, are struggling to recover from the pandemic as a result of the continued materials crisis. For some time now, demand for building materials has been outstripping supply, with this month’s data representing the second-fastest rate for input cost inflation since recording began. The FMB’s latest membership survey revealed the prevalence of this crisis within the sector, with 98% of FMB members experiencing price increases for building materials. It’s vital that transparent allocation and pricing policies are implemented to help enable SMEs to have continued and stable access to materials. The Government should also re-evaluate their position with regard to issuing temporary visas for EU HGV drivers, to better enable the delivery of materials.”
Berry continued: “Notwithstanding the wider economic impact risked by consumers choosing not to undertake building projects as a result of delays, there is also a real risk that the current environment is exploitable by cowboy builders. Builders are working hard to stick to agreed timelines, but consumers must be cautious about promises to complete jobs quickly and cheaply. All too often these will be too good to be true, and could well leave households at the mercy of unscrupulous cowboy builders.”
“Victim of its own success”
Gareth Belsham, Director of the national property consultancy and surveyors Naismiths, also pointed to the supply and pricing challenges as major concerns, asking “is it a blip, or will it start to impact not just the delivery of projects, but demand as well.”
He explained: “The construction industry is fast becoming a victim of its own success. The supply chain problems are no longer just project speed bumps; they’re applying the brakes to new orders as well.
“Soaring prices of key building materials, not to mention patchy availability and lengthy delays, have forced some construction firms to admit to clients that they simply cannot keep up with demand for building projects.
“With steel, timber and fuel costs all mushrooming, contractors are seeing their margins eaten away. The pipeline of new work is still healthy by historical standards, but orders are now coming in at the slowest rate since March.
“But despite a growing sense that the post-lockdown boom may have peaked, the mood in the industry remains overwhelmingly upbeat. More than half of the builders surveyed for the PMI predict a further increase in activity over the coming year.
“Cool heads in the industry have seen this all before, and experienced developers and builders are recalibrating prices and schedules and getting on with it.“But there is still the nagging question about the painfully high levels of material cost inflation; is it a blip, or will it start to impact not just the delivery of projects, but demand as well?”