UK construction boom hits 24 year high as raw materials run low

·2-min read
A warning sign is displayed at a Persimmon construction site in Dartford, Britain August 21, 2015. REUTERS/Neil Hall/File Photo
June was a booming month for UK construction. Photo: REUTERS/Neil Hall/File Photo

The UK's construction sector grew at its strongest rate for 24 years in June, as reopening and the UK's ongoing housing boom spurred strong activity across the industry.

IHS Markit and CIPS UK construction purchasing managers index (PMI) hit 66.3 in June, up from 64.2 in May. PMIs are given on a scale of 0 to 100, with anything above 50 signalling growth.

The construction bump was supported by another sharp rise in new orders, Markit said, and came despite tailbacks in delivery times, raw materials shortages, and rising costs across the sector.

"Construction’s heavy load remains inflation rising to its highest rate since April 1997 as a staggering 86% of respondents reported paying more for their goods in June," said Duncan Brock, group director at the Chartered Institute of Procurement & Supply, which helped compile the data.

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Markit said survey respondents reported big rebounds in demand for new construction work, especially residential building and commercial projects related to the reopening of the UK economy.

Work in the house building sector increased at the fastest pace since November 2003 (68.2). Commercial work (66.9) grew at the strongest rate since March 1998. Civil engineering activity rose sharply in June (60.7), but the speed of growth eased to a three-month low.

June's bumper performance means total new orders across the construction sector have increased in each of the past 13 months, although the latest expansion was slower than May's survey-record high.

While the sector is booming, Markit's survey uncovered issues on the horizon. Three quarters of firms reported longer lead times from suppliers and June was the worst month for supplier delays since the survey began 24 years ago. 

"The meagre availability of raw materials placed obstacles in the path of stronger workflows," said Brock. "A lack of delivery drivers and logistics difficulties for EU imports left stock undelivered or unavailable and construction companies waited while costs mounted."

Construction companies reported stock shortages among vendors, reflecting severe delays with shipping and haulage, especially for products sourced from the EU. Cement, concrete, plaster, steel, timber and roof tiles were all in short supply.

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