Material cost rises as buyers report “phenomenal” increases

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Nationaltradesmen.co.uk have been reporting cost rises across the board with many materials being increasingly difficult to get hold of and price rises loom for many builders and contractors with the pace of with cost rise highest for a quarter of a century.

The rises up 64.2 in May  from 61.6 in April – the bellwether IHS Markit/CIPS UK Construction PMI Total Activity Index registered above the 50 no-change value for the fourth consecutive month and signalled the strongest rate of output growth for just under seven years and expected to rise further.

With house house building (index at 66.3) was the best-performing category of construction activity in May, followed by commercial work (64.4).

Commercial projects saw the steepest since August 2007 which, reflects strong demand conditions following the reopening of customer-facing areas of the UK economy after the pandemic.

Civil engineering activity (index at 61.3) also increased sharply during May, although the pace of expansion eased slightly since March 2021.

Suppliers’ delivery times lengthened sharply in May, with the downturn in vendor performance the second-steepest since the survey began (exceeded only by that seen in April 2020).

With the continued supply chains and steep rises in material prices including steel and timber due to Brexit and the pandemic the overall rate of input price inflation was at a 24 years high of data collection.

The overall feeling by builders is that customer demand will continues, alongside optimism about the UK economic outlook following the successful vaccine roll out and confidence to spend coming out of the pandemic.

Around 61% of the survey panel predicted a rise in business activity, while just 8% anticipate a decline thanks to the growing consumer confidence.

 

Duncan Brock, group director at CIPS, commented saying: “Busy purchasing managers were under pressure to keep up and buying up at the fastest rate since April 1997, changing sourcing strategies to find depleting essential materials and stocking up just as supply chain problems continued to mount, along with prices.

“With inflation for goods and raw materials at a 24-year high, companies will be concerned that much-needed profits will be eaten away as building projects take shape and could be held up by some of the longest delivery times on record.

“Skills shortages are also becoming a problem, with recruiters finding talented labour hard to find, as job creation was at robust levels and the threat of staffing cutbacks has become a distant memory.”

Tim Moore, economics director at IHS Markit, added: “There were widespread reports citing shortages of construction materials and wait times from suppliers lengthened considerably in comparison to those seen during April. Imbalanced supply and demand led to survey record increases in both purchasing prices and rates charged by subcontractors.

“Despite severe challenges with materials availability, construction firms remain highly upbeat about their nearterm growth prospects. Nearly two-thirds of the survey panel forecast an increase in output during the year ahead, while only one-in-13 forecast a decline.”