Construction moves forward amid supply chain issues

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The Bellwether industry index hits highest level in three months as buys report upturn in activity as construction powers ahead with the worst of the supply chain issues are left behind.

Construction work increased across all sectors as materials and staff shortages eases slightly which is a large improvement over the previous three months although buyers reported another steep rise in input costs but the rate of inflation slipped to a six month low.

In the near term the showings for construction growth remained positive in October with half 52% forecasting an increase in output during the year ahead, while only 8% expect a decline.

Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply, said: “Activity in the construction sector powered ahead in October with the fastest rise in purchasing for three months as builders continued their summer bounce into the autumn and resorted to forward buying and building stock levels.

“New order growth remained constant but increasing lead times from suppliers made commitment to contracted projects difficult because of the unpredictability of materials arriving on time as reported by over half of all supply chain managers.

“A slight moderation in input price inflation also gave hope to builders that price rises were receding, which could mean fewer delayed projects as costs were reviewed.

“With rising optimism and employment levels builders seem confident that the next 12 months will be rosier. However, with the squeeze on supply and staff shortages, its far from guaranteed that uncertainty and instability are behind us just yet.”

Tim Moore, Director at IHS Markit, which compiles the survey added: “UK construction companies achieved a faster expansion of output volumes in October, despite headwinds from severe supply constraints and escalating costs.

“House building showed the most resilience, as signalled by the fastest rise in residential work for three months.

“However, the volatile price and supply environment added to business uncertainty and continued to impede contract negotiations. As a result, the overall rate of new order growth was unchanged from the eight-month low seen in September.

“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, as the number of construction firms citing supplier delays fell to 54% in October, down from 63% in September.

“Similarly, reports of rising purchasing costs continued to recede from the record highs seen this summer.”