Shortages of staff & materials slow construction growth


Here at Advantage Home Construction Insurance, we’ve been providing structural warranty cover for our construction clients nationwide during a particularly busy period for the sector this quarter.

However, despite strong and sustained growth in demand for new homes, the IHS Markit/Cips UK construction purchasing managers’ index dipped to 58.7 in July, showing a slower pace of growth, as construction firms reported shortages of skilled staff and difficulties securing building materials.

The Guardian reported that after hitting a 24-year high in June, the construction industry last month grew at the slowest pace since February, after firms that had stockpiled materials in the first half of the year began to run low while others were unable to find enough workers to fulfil bulging order books.

A positive long-term outlook, but with short-term supply chain challenges

constructionAnalysts said the future looked rosy for much of the industry as the economy reopened and a consistently high level of growth was likely to re-establish itself once the pressure on supply lines began to ease.

However, as Advantage has noted previously, despite the generally positive outlook for the sector, the difficulty that many firms are experiencing in sourcing building materials is still causing significant short-term challenges.

According to the Guardian, more than eight in 10 businesses said they had seen prices for raw materials and other costs rise in July. Only one in 100 said costs fell in July.

Higher prices combined with shortages of cement, copper and steel delayed some projects that were already under way and some planned projects, industry bosses said.

Two-thirds of businesses said they had to wait longer for deliveries, putting this down to Brexit friction, congestion at ports and a shortage of transport.

Most construction firms say materials shortages have hampered the market

An assessment of the industry by the surveyors body Rics found that 82% of firms said a shortage of materials hampered the market during second quarter, up from 57% previously.

Martin Beck, the senior economic adviser to the EY Item Club, stated:

“A fall in the construction index accompanied declines seen in the same month’s services and manufacturing indices. But the loss of momentum in the construction sector looks to be more an issue of supply-side constraints, related to a lack of transport availability, port congestion and trade frictions, than weaker demand.”

Advantage’s view: We’ve previously written that although supply shortages are causing the sector short-term pain, this is mitigated somewhat by continuing strong demand, which should enable many construction firms to weather price rises for materials and delays to projects. At the time of writing, this still seems to be the case, even when factoring in the added pressures caused by staff shortages.

Do you require a structural warranty for your project? The Advantage team is proud to work with clients on developments throughout the UK. 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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