A rapid rise in construction output has happened in a period of just eight months, as reported last month. Although despite this, optimism seems to be fading, since the industry is looking ahead to the future and seeing a spate of supply shortages that could have an impact on the rise in costs that are causing output to possibly decline. If things sounds like something that might be of interest to you, continue reading!
Housing output rose from 54.3% in January to 61.5% last month, since construction businesses are reporting the largest figures they have seen since output rose from June of last year. There seems to be continued volatility within the industry in relation to price and supply conditions, with the overall growth rate in new orders seeing a very rapid acceleration since the beginning of the year.
Improving in line with an increase in economic activity, client confidence rose with England dropping plan B restrictions (work from home, mandatory face masks). However, a fair amount of reporting of labour shortages and building materials unfortunately continues to impact the UK’s construction industry negatively, as a rise in input costs have been putting additional strain on companies across the country.
Reiteration from experts has proved that rapid growth in output could mean that the construction sector returns to pre-pandemic output levels. What we have yet to see is the ways in which the ongoing Ukrainian war will cause serious consequences for global energy prices, exacerbating pressures on inflation. This is yet another worry for delivery of construction projects at a period of time that is so crucial to the construction industry, when the sector begins getting busy during summer.
As energy prices are already increasing (oil prices and liquified natural gas are now at an all-time high), and alongside thin margins within the industry, there is a very real chance that the pressure on inflation will force closure for some businesses in the UK. Unexpected trauma to the sector from past events (that include Brexit) have meant that people are now more capable of trying to adapt to a fresh market environment, but this is only to a certain extent. Companies are also putting considerable attention on their personal supply chains and beginning to understand that there is a real need for business diversification that was not as accepted by the industry before.
This might mean that the industry can withstand the disruption of supply chain flow from the crisis in Ukraine, since Brexit has prepared them for these kinds of uncomfortable situations.
There may be a sense from construction contractors that they are able to withstand the turmoil to the economy that we have seen over the past couple of years in an effective way, but unfortunately obstacles will present themselves in the near future. Because of this, contingency plans are already being formulated as it relates to the taxes on residential cladding work that will come into effect in April.
It is therefore massively important that construction contractors closely monitor the vitality and health of their own supply chain while making efforts to navigate the negative effects of an increase in costs; consistently regular dialogue and an affirmation of early customer engagement are essential ways to accomplish this. Because construction output is only increasing it is best to consider that the construction output growth will likely slow and inevitably decline at some point, so keep the future in mind and prepare for further adjustments that might need to be made.
MP Groundworks are one of the leading construction companies in the Gloucestershire area with a reputation within the industry and local community for excellent professional workmanship and first class personal service. If you’d like to know more about what we do and how we can help take a look at our website www.mpgroundworks.co.uk or give us a call on 01452 380 887.