Supply chain problems ease further as output grows again

Output grew at its fastest rate in four months in November with more evidence emerging that the worst of the supply chain issues dogging the industry may have peaked.

The latest PMI data drawn up by IHS Markit and CIPS said total activity for November stood at 55.5, up from the score of 54.6 the month before.

Less than half of those questioned were reporting longer than normal delivery times with the 47% who said so down from the 54% who were saying the same thing in October with the figure significantly below the 77% peak recorded in June.

But the problems have not disappeared with just 4% reporting an in improvement in delivery times with delays at ports and availability of HGV drivers again being cited as reasons for the time it was taking getting materials to sites – although the availability of some items, especially timber, has improved.

Around 72% of the survey panel reported an increase in purchase prices in November, while only 3% reported a decline.

Duncan Brock, group director at CIPS, said: “[The] 47% of construction firms reporting longer waiting times is the smallest number for eight months.

“Even with this glimmer of hope that the pressure on deliveries [is] easing, purchasing remained at higher level to counteract disruptions from ongoing driver shortages and port delays as supply chain managers bought more than their immediate need.”

Despite the improving situation, economists warned the Omicron variant of coivid-19 had the potential to disrupt sites in the winter months ahead.

Jan Crosby, head of infrastructure, building and construction at KPMG, said: “While so far the new variant has had little to no impact on activity, it’s difficult at this stage to see how this plays out. Another tightening of restrictions, which could see more workers needing to self-isolate, could create further delays or shut down sites altogether. It is a shame there is so much to contend with because the fundamentals in the industry remain robust.”

And Max Jones, the director of Lloyds Bank’s infrastructure and construction team, added: “While a full-scale lockdown looks unlikely, a return to the volatility felt earlier in the year when sites were depleted by quarantine requirements will strain contractors, especially smaller players with leaner workforces.”

The latest monthly figure means output has grown in each of the last 10 months with the figure in June reaching 66.3, a 24 year high, a result many are now putting down to a single month surge in pent-up demand following the easing of lockdown restrictions earlier this year.

A steeper rise in commercial construction with a score of 56.5 meant the sector overtook housebuilding as the best performing which saw its score slip to 54.7 from 55.4 the previous month. Civil engineering continued to trail but its score of 53.9 was the largest rise since August.