Subcontractor prices fall for first time in over three years

Aaron Morby 2 years ago
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Construction buyers have seen the first fall in subcontractor prices in just over three years as output fell again sharply in October.

The steep fall in house building is continuing to weigh heavily on overall construction activity. Also fragile client confidence and elevated borrowing costs were blamed for the fall in new work for the third month running

The bellwether S&P Global/CIPS UK Construction Purchasing Managers’ Index registered 45.6 in October, up slightly from 45.0 in September, but still the second-lowest reading since May 2020.

House building decreased for the eleventh successive month in October and at a much steeper pace than elsewhere in the construction sector (index at 38.5).

Civil engineering activity also decreased sharply (index at 43.7) and the rate of decline was the fastest since July 2022.

But there were some signs of stabilisation in commercial building, with activity falling only marginally and at a slower pace than in September (index at 49.5).

Softer demand for construction products and materials resulted in pressure on suppliers for price discounts.

The latest survey indicated that overall purchasing prices decreased at the fastest pace for over 14 years as lower timber, steel and transportation costs were passed on by vendors.

Tim Moore, Economics Director at S&P Global Market Intelligence, which compiles the survey said: “October data highlighted another solid reduction in UK construction output as elevated borrowing costs and a wait-and-see approach to new projects weighed on activity.

“Competitive pressure on suppliers to pass on lower commodity prices resulted in the fastest decline in input costs since August 2009.

“Subcontractors meanwhile cut their charges for the first time in more than three years in response to a further downturn in workloads during October.”

Dr John Glen, Chief Economist at the Chartered Institute of Procurement & Supply (CIPS), said: “There is no doubt that UK construction is in a difficult period and there will likely be further challenging months to come.

“Despite commercial building activity continuing to fall there were signs of stabilisation within this subsegment, and this may provide a glimmer of hope which the wider construction sector will keep a close eye on as we move into next year.”

 

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