Material and staff shortages hold back construction recovery

September saw another growth slowdown in the construction sector, with output volumes rising to the smallest extent for eight months, according to research from the Chartered Institute of Procurement & Supply (CIPS) and IHS Markit.

Survey respondents also cited disruptions on site from unavailable transport, a severe lack of materials and continued staff shortages. A rapid drop in sub-contractor availability was reported in September, with imbalanced demand and supply contributing to the steepest rise in sub-contractor charges since the survey began in April 1997. Some firms noted that the unpredictable pricing environment had slowed clients’ decision-making on new orders and led to delays with contract awards.

All three broad categories of construction activity saw a loss of momentum in September, with the biggest slowdown seen in civil engineering (51.0, down from 54.8 in August).
House building also decelerated in September, with the latest expansion the weakest since the recovery began in June 2020 (52.8). This left the commercial segment (53.6) as the best performing category during September. Resilience in this sub-sector reflected a continued boost to order books from the reopening of the UK economy.

Construction companies recorded a moderate increase in new work during September, with the rate of growth easing sharply to its weakest since the start of 2021. The slowdown was linked to hesitancy among clients and less favourable demand conditions.

Duncan Brock, group director at CIPS, said: “Construction activity suffered another setback in September, as builders were hammered by staff and material shortages, delivery delays and higher business costs as this phase of the post-pandemic recovery became the shakiest for eight months.

“Housing and civil engineering bore the brunt of the slowdown with residential building the weakest since June 2020 during the early stages of the pandemic. The increases in shortages also affected project agreements with a sharp fall in new order growth, where customers hesitated to commit, uncertain about prices and the timing of completion. Over 60% of supply chain managers said their deliveries were taking longer and 78% were paying more for their goods as inflation remained stubbornly high.”

He pointed out that there was good news for job seekers though as the demand for skilled labour remained unabated, and companies were left wanting more. Sub-contractors were unable to fill the widening gap of need as their availability shrank and prices charged accelerated to record levels. Brock added: “Unless stronger supply chain performance is nailed down along with headcount, we are heading towards a stagnant autumn because the sector is certainly not on an even footing at the moment.”

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