Construction output is rising at its fastest rate since 2014


Advantage’s structural warranty clients won’t need us to tell them that it’s been a particularly busy period for construction! And the latest IHS Markit/CIPS Construction Purchasing Managers’ Index (PMI) – an early indicator of economic health – bears this out, rising to 64.2 (up from 61.6 a month ago) its highest level since September 2014. Any number over 50 indicates a growth in output across the industry.

Construction firms remain highly upbeat

constructionTim Moore, economics director at survey compiler IHS Markit, was quoted by Sky News stating that:

“Despite severe challenges with materials availability, construction firms remain highly upbeat about their near-term growth prospect.”

However, Sky News also reported that price pressures for construction companies are rising at their fastest rate since records began, according to new research, leading to a sharp increase in supplier delivery times.

Skyrocketing demand for materials

construction siteBBC News suggests that the supply problems stem from a number of factors. Construction industry projects have surged since lockdown began easing which has led to skyrocketing demand for already scarce materials.

There are also issues hitting specific products, such as the warmer winter affecting timber production in Scandinavia while the cold winter weather in Texas affected the production of chemicals, plastics and polymer.

The impact of shipping costs

The BBC quoted Noble Francis, economics director of the Construction Products Association, who said:

“Shipping costs have risen sharply due a shortage of empty containers from Covid-19-related issues and the sharp recovery in global demand,” he told the BBC.

For instance, the cost of shipping a 40ft container from Asia to Northern Europe soared from $1,500 (£1,061) in summer 2020 to more than $8,300 (£5,873) by May 2021, he said.

Advantage’s view: This is not the first time we’ve written about the challenge of rising costs for materials and this issue is highly unlikely to be resolved this quarter (if only!) However, as intensely challenging as materials shortages and rising costs undoubtedly are, as Tim Moore notes, construction firms remain “highly upbeat about their near-term growth prospect.” That’s not to say that the industry isn’t feeling the pinch; with the Office for National Statistics projecting a rise of 7-8% in material prices, with increases for certain materials, such as timber, expected to more than double during the course of the year, these are not small or gradual price rises that we’re talking about. However, it’s an indication of just how brisk business has been for the construction and property sector that sentiment from leading figures in construction remains positive even in the face of such sizable logistical challenges.

Do you require a structural warranty for your project? The Advantage team is proud to work with clients on developments throughout the UK, adhering to all social distancing guidelines to ensure that projects are covered by the appropriate structural warranty. To find out more, call: 0845 900 3969 or email: sales@ahci.co.uk

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Advantage Home Construction Insurance (AHCI) provides structural defects insurance – operating nationally with offices in Warrington, London and Birmingham – offering development-related insurances and a service designed to give customers peace of mind.

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