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Construction sector growth at highest point in 24 years

A number of firms reported supply shortages

The construction sector grew at its fastest rate in 24 years in June, as demand for new build homes and commercial property continued to soar.

That is according to the latest PMI data, which closely follows the construction industry.

The IHS Markit/CIPS construction PMI surpassed expectations, rising to 66.3 in June, up from 64.2 the month before.

With anything above 50 representing an increase in activity, it was the highest recording since 1997.

Survey respondents drew attention to a rapid turnaround in demand for new construction work, especially residential building and commercial projects related to the reopening of the UK economy.

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A number of firms are finding it difficult to meet raised levels of demand. Shortages of raw materials and bottlenecks in supply chains are causing costs to pile up and adding to concerns over inflation.

Tim Moore, Economics Director at IHS Markit, which compiles the survey, commented further on its findings:

“June data signalled another rapid increase in UK construction output as housing, commercial and civil engineering activity all expanded at a brisk pace. The headline index signalled the fastest rise in business activity across the construction sector for 24 years. Total new orders expanded at one of the strongest rates since the summer of 2007, mostly reflecting robust demand for residential projects and a boost to commercial work from the reopening UK economy,” said Moore.

“Supply chains once again struggled to keep up with demand for construction products and materials, with lead times lengthening to the greatest extent since the survey began in April 1997. Survey respondents widely reported delays due to low stocks of building materials, shortages of transport capacity and long wait times for items sourced from abroad.”

“Purchasing prices and sub-contractor charges both increased at a survey-record pace in June, fuelled by supply shortages across the construction sector. Escalating cost pressures and concerns about labour availability appear to have constrained business optimism at some building firms. The degree of positive sentiment towards the year- ahead growth outlook remained high, but eased to its lowest since the start of 2021.”

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