Rising prices?
8 April 2021
It’s a case of déjà vu with the statistics for March released earlier today concerning the UK construction industry.
Data in the Purchasing Managers’ Index (PMI) survey compiled by IHS Markit for the Chartered Institute of Procurement & Supply reinforce February’s positive picture with a considerable gain in momentum in March, supported by robust rises in house building, commercial work and civil engineering.
Adjusted for seasonal influences, the Index registered 61.7 in March, up from 53.3 in February, with the strongest rate of construction output growth since September 2014. Housebuilding, which achieved an index of 64.0 – with 50.0 meaning no change – was the best-performing category, with growth the fastest since July 2020.
Survey respondents reported delayed projects getting under way, especially in areas such as hospitality, leisure, and office development. The survey also recorded higher workloads due to greater spending on residential construction work and rising new home sales.
This certainly mirrors the experiences of the many hirers I’ve mentioned recently, like Anglian Plant, Site Equip and FTH Hire Group to name just three, who report high levels of demand that are astonishing given that, a year ago, the country was in lockdown.
However, hire companies have also been telling me of difficulties in obtaining new machines and parts for their fleets, with production delays caused by the long-term impacts of furloughed workforces and global supply chain disruption. And this is also reflected in the PMI data.
Higher demand for construction products and materials contributed to longer wait times for deliveries by suppliers. Around 41% of the survey panel reported longer delivery times from suppliers in March, while only 1% saw an improvement.
Indeed, this led to the steepest increase in purchasing prices since August 2008, with respondents noting that suppliers had cited Brexit and the pandemic as reasons for price rises in March.
As several earlier blog posts have discussed, limited availability combined with rising demand must put pressure on costs.
The industry generally might be buoyant, but careful management will be needed to ensure hirers can offer the right equipment when it is required, and at rates that cover their costs.
