UK construction growth held back by staff and supply shortages

London

BRITAIN'S construction industry is struggling to keep up with a surge in demand for new building work, complaining that shortages of skilled workers and supplies is delaying projects.

A survey of purchasing managers last month indicated the weakest growth since February, IHS Markit said. A separate report from the Royal Institution of Chartered Surveyors (RICS) showed four in five construction firms said building material shortages are constraining activity, and two-thirds find it difficult to hire bricklayers and carpenters.

The findings indicate headwinds weighing on the pace of recovery in the construction industry as well as the wider economy. Loosening pandemic rules have unleashed pent-up demand, adding to inflationary pressures on both wage costs and the cost of raw materials like lumber.

"Long lead times for materials and shrinking subcontractor availability were cited as factors holding back work," Tim Moore, economics director at IHS Markit, said in a report on Thursday. "Another rapid increase in purchasing costs was linked to global supply and demand imbalances. Many firms noted that local issues amplified inflationary pressures."

The Purchasing Managers' Index dropped to 58.7 in July, well below the 24-year high of 66.3 in June. Economists had expected a more gradual slowdown to 64.4. The figures confirm that the industry continued to lose momentum after official government data showed an unexpected drop in activity in both April and May.

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IHS said 66 per cent of the panel it surveyed reported longer waiting times for deliveries in July. Subcontractors were charging more and having difficulties filling vacancies. Order books rose but at the weakest pace since March.

The RICS report indicates that while the broader outlook for growth remains positive, constraints on the industry are continuing to weigh on output. So-called "white-collar" professionals including quantity surveyors are also increasingly unavailable, according to the survey.

Labour shortages have become especially acute in the UK since the nation exited from the European Union, decreasing the pool of skilled workers. The number of EU construction workers has halved in the last four years, and contractors who laid off staff during lockdowns are struggling to hire them back.

Builders expect the cost of materials to rise by over 10 per cent over the next year. According to a separate survey, wage growth expectations are highest in the construction industry along with transport and hospitality.

Despite mounting pressures and slumping growth in April and May, construction output is expected to rise 13.7 per cent this year and 6.3 per cent in 2022, according to the Construction Products Association.

A surge in UK homebuilding helped propel construction activity to pre-pandemic levels in the first months of 2021 after total output plummeted 44% per cent between February and April last year. BLOOMBERG