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Construction subbie availability sees record drop as prices boom

Construction subcontractor availability has fallen at its steepest rate since the Markit/CIPS Construction Purchasing Managers’ Index began in 1997.

According to data from August, strong recovery in UK construction output continued, driven by sharp rises in housing, commercial and civil engineering activity.

The survey saw a record decline in subcontractor availability and the steepest rise in rates charged by subcontractors since it began in 1997, as evidence continued of a heating supply chain, with tier one contractors facing more pressure in their supply chains.

At 64.0 in August, up from 62.4 in July, the seasonally adjusted CIPS data showed the fastest overall increase in output levels since January.

Simon Rawlinson, head of strategic research at EC Harris said: “August’s surprise high reading for the construction PMI contrasts strongly with data from manufacturers emphasising how construction is expanding far faster than the wider economy.

“The challenges faced by construction as it resources recovery in 2014 require clients and suppliers to collaborate effectively to ensure that much needed construction is delivered on time and to budget.”

Chris Williamson chief economist at Markit, said: “Forward-looking indicators were encouraging, suggesting the construction sector will continue to support the economic recovery in coming months. New orders in the industry continued to rise strongly in August at a rate rarely exceeded in the survey’s history, albeit with the rate of increase slowing marginally for a second month running.

“Business expectations about the year ahead meanwhile picked up for a second month, hitting the highest since March. More than half (59 per cent) of all firms expect business activity levels to rise over the coming year while only 7 per cent expect a decline.

“The concern is that shortages of both raw materials and suitable subcontractors could start causing growth to slow, and could push up inflationary pressures within the sector. “

Stefan Friedhoff, global corporates managing director for construction at Lloyds Bank Commercial Banking, said: “While house-building remains the star pupil, there are encouraging signs in commercial construction, too. As we move into the final few months of the year, it is vital that this momentum is sustained in the face of some headwinds, notably reports of labour and material shortages and potential future rate rises.

“The true proof of a return to normality will be in activity spreading from a consistently buoyant London out to other regions of the UK. Nevertheless, there is enough optimism in the sector to suggest a sustained recovery is underway and those outside the capital are also benefitting.”

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