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Buyers report fall in new orders to five-month low

New construction orders have fallen to a five-month low as rising costs weigh on growth in the sector, according to a survey of buyers.

The IHS Markit/CIPS UK Construction PMI Total Activity Index recorded a score of 55.2 in August (where 50.0 indicates no change), down from 58.7 in July.

While volumes increase, the pace of growth has started to slow, with softer expansions across housebuilding, commercial work and civil engineering.

Meanwhile, buyers reported “sustained and severe” supply chain disruption in August, which has led to spiralling costs.

Commercial work (56.0) was the best-performing category in the month, although the rate of expansion eased to the slowest for six months. That was followed by housebuilding (55.0) and civil engineering (54.8).

Total new work increased for the fifteenth consecutive month, with more projects delayed by Brexit and covid-19 being resumed, although client confidence was dampened by volatility in raw material supplies and increased costs.

Usamah Bhatti, economist at IHS Markit, which compiles the survey, said: “Evidence that the UK construction sector began to feel the impact of ongoing supply chain disruption was widespread midway through the third quarter of 2021. Growth rates for overall activity as well as the three monitored subsectors eased further from the recent highs earlier in the summer. Similarly, new business inflows have continued to increase at a marked pace, yet even here the rate of growth has eased to a five-month low.

Bhatti added that supply chain disruption continued to disrupt activity across the UK construction sector, as demand for materials and logistics capacity outstripped supply. “Average vendor performance continued to deteriorate at a near-survey record rate, as firms noted severe shortages of building materials, a lack of available transport capacity and long wait times for items from abroad due to port congestion.

"As a result, the rate of input cost inflation faced by construction companies accelerated to the second-fastest on record, while the increase in subcontractor rates hit a fresh series high, fuelled by supply shortfalls in the sector. Despite this, businesses noted a stronger degree of optimism regarding the year-ahead outlook, as more than half of survey respondents predicted a rise in activity.”

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