UK construction material costs slide at fastest pace in 14 years
UK CONSTRUCTION companies reported the sharpest drop in the cost of building materials in 14 years, adding to signs that a more sluggish economy is starting to ease inflationary pressures.
S&P Global’s construction purchasing managers edged up to 45.6 in October from 45 the previous month, remaining well below the threshold of 50 indicating a contraction. October’s reading was the second-worst since the first Covid lockdown.
However, the sector’s slump – which has been triggered by a retrenchment in housebuilding – helped ease cost and supply-chain pressures. Input prices fell a the sharpest pace since 2009, reflecting weaker demand for construction materials. The rates charged by subcontractors slipped for the first time since July 2020.
The survey suggests that a struggling economy is helping to dampen inflation as suppliers are forced to be more competitive amid lacklustre demand. The construction sector is particularly hard hit by high interest rates and has suffered a sharp increase in insolvencies.
Tim Moore, economics director at S&P Global Market Intelligence, said there were “competitive pressure on suppliers to pass on lower commodity prices.”
“October data highlighted another solid reduction in UK construction output as elevated borrowing costs and a wait-and-see approach to new projects weighed on activity,” he said.
The slump in the property market continued to drive the construction sector’s woes with housebuilding declining for an 11th consecutive month. Overall new work contracted at the joint-sharpest pace since May 2020 while confidence is at its lowest level this year.
“The drop in optimism may not be surprising, given there have been a number of high profile insolvencies across the sector in recent months,” said Toby Banfield, financial restructuring partner at PwC UK. “This can significantly impact developers who need to find alternative contractors to complete projects, normally at a substantially higher cost than envisaged in the original design and procurement phase.” BLOOMBERG
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