Shortage of subbies hampers construction growth

Grant Prior 2 months ago
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Construction buyers have reported a near record decline in subcontractor availability.

Latest results for the bellwether IHS Markit/CIPS UK Construction PMI Total Activity Index show a lack of subcontractors and materials shortages hampered growth last month.

The index registered 58.7 in July – down sharply from June’s 24-year high of 66.3 but still well above the crucial 50.0 no-change threshold.

The latest decline in subcontractor availability was the second-fastest since the survey began in 1997, exceeded only by that seen  during the lockdown in April 2020.

Tim Moore, Economics Director at IHS Markit, said: “Long lead times for materials and shrinking subcontractor availability were cited as factors holding back work on site.

“Around two-thirds of the survey panel experienced longer wait times for supplier deliveries in July, while just 2% reported an improvement since the previous month.

“July data marked the first real slowdown in the construction recovery since the lockdown at the start of this year. It was unsurprising that UK construction companies  were unable to maintain output growth at the 24-year high seen in June, especially with widespread supply shortages and constrained capacity to take on additional orders.”

Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply, added: “The pervasive weaknesses in supply chains along with a lack of staff and contractor availability were laid bare as construction lost some of its get-up-and-go.

“The rampant rise in prices for raw materials and transportation continued to be the construction’s heavy load along with historically long delivery times.

“Though there was a slight improvement in supplier performance from June’s record low, it was partly as a result of frustrated supply chain managers reining back on purchases that were unlikely to arrive when needed.

“Businesses were also unable to expand on staff capacity, where even the most prolific hiring periods since 2014 was insufficient for builders’ ability to complete work in hand.

“Faced with transport disruptions, shortages of essentials and Brexit delays, the initial spurt of activity this year is fast hitting the rocks.

“Building optimism was dampened to the lowest since January as it is difficult to foresee when all these challenges are likely to subside.”

Fraser Johns, finance director at construction firm Beard, said: “We know these are challenges that are not set to go away any time soon, so in order to move forward it’s going to be crucial to take a proactive approach.

“Working in collaboration with suppliers and subcontractors, including ensuring prompt payment, will go some way to mitigate the risk of projects falling through.

“But customers need to be aware of the issues facing the industry is facing as well. Being transparent at the point of submitting tenders about the need to order certain materials early to ensure delivery on time, using two stage procurement processes, will help to overcome some of these issues.”

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