Supply chain round-up: material prices keep rising as contract awards fall

A week is a long time in politics, as we have just experienced, but there was also plenty happening on the construction data front over the past seven days.

Figures released by the government, major housebuilders and several research specialists have shed new light on the economic conditions the sector is facing. Here are the highlights.

BEIS: material prices rise yet again

Construction material prices have risen for a 20th consecutive month, according to official figures. The all-materials, all-work index produced by the Department for Business, Energy and Industrial Strategy hit 158.8 in May, data released last week revealed. This is up 3.7 per cent from April and represents a 42.3 per cent jump since the last time prices stayed constant, back in September 2020. Concrete reinforcing bars went up 7 per cent in May, while fabricated structural steel soared by 11.8 per cent.

CIPS: delivery times lengthen

Supplier delivery times lengthened in June, according to a poll of construction buyers. The Chartered Institute of Procurement and Supply’s Purchasing Managers’ Index found that staff shortages and lack of available transport were the biggest reasons for longer wait times for building products. Meanwhile, cost inflation ramped up, the survey found, with 71 per cent of respondents reporting an increase in purchasing prices and just 1 per cent seeing a fall. Energy and fuel costs were key factors in driving up prices.

Snap Analysis: contract awards plummet

The value of contract awards fell by more than a fifth in the second quarter of this year, data has revealed. A Snap Analysis report compiled by insight firms Barbour ABI and AMA Research showed that £5.9bn of construction deals were signed from April to June 2022, down 22 per cent from the prior three months. The report said this brought contract awards in line with long-term averages following a strong start to the year. The value of commercial and retail agreements was down 57 per cent to £0.4bn, while education deals dropped by 45 per cent to £0.3bn.

Glenigan: starts expected to fall

Less work will get underway on construction sites this year than in 2021, a key report has predicted. Data firm Glenigan’s annual forecast outlined an anticipated £66.5bn of project starts in 2022, excluding extremely big one-off jobs. This would be down from £67.9bn last year. A recovery is expected, however, with £71.6bn of underlying starts forecast in 2023, followed by £73.0bn in 2024. Private housing starts are expected to drop by 5 per cent this year, according to Glenigan, due to a combination of economic factors weakening demand.

Housebuilders: planning delays disrupt works

Two major housebuilders have updated the City on their trading fortunes in the past week. Ahead of a results announcement covering the six months to 30 June, Persimmon said planning delays, disruption in material supply chains and challenges securing labour had “impacted completions in the period”. The firm announced 6,652 legal completions in the first half of 2022, down from 7,406 in the same period last year.

Meanwhile, Vistry said planning “remains the single most significant constraint on the business” as it posted a minor increase to 3,219 completions in the first half of this year. Vistry blamed council capacity and an “increasingly challenging political and regulatory environment” for longer lead times and said it was factoring these in to its forecasts.

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