Shortages of materials and staff hold back the construction recovery in September

September data revealed another growth slowdown in the construction sector, with output volumes rising to the smallest extent for eight months.

A rapid drop in sub-contractor availability was reported in September. Imbalanced demand and supply contributed 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.

At 52.6 in September, down from 55.2 in August, the headline seasonally adjusted IHS Markit/CIPS UK Construction PMI® Total Activity Index dropped further below the 24-year high seen in June (66.3). The latest reading signalled only a moderate expansion of total construction output and the weakest speed of recovery for eight months.Reports from survey respondents linked the slowdown to a combination of supply chain issues and softer demand.

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-Output growth eases for third month running Sub-contractor charges increase at survey-record pace Widespread supply shortages lead to rapid cost inflation Data were collected 13-29 September 2021. 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.

September data indicated another strong rise in employment numbers across the construction sector, driven by greater workloads and stretched business capacity. However, the latest rise in staffing levels was the least marked since April, which partly reflected long wait times to fill vacancies.

A lack of sub-contractor availability added to the squeeze on labour supply in September. Shortages of sub-contractors also led to additional cost pressures, with rates charged for sub-contracted work increasing at a survey-record pace.

Purchase prices increased rapidly in September, although the rate of inflation eased further from June's all-time peak. Around 78% of the survey panel reported a rise in their cost burdens, which was mostly linked to supply shortages and transport surcharges.

Meanwhile, the latest survey illustrated that construction firms remained highly upbeat about the business outlook. Just over half (51%) forecast rising output, while only 8% anticipate a decline. However, the degree of confidence was weaker than August amid some concerns that the supply chain crisis will hinder growth.

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