UK Construction Confident but Supply Shortage Looms
UK construction firms are recovering strongly from their post-crisis slump in output Reuters

Jobs are being created in the UK construction sector at a record pace.

That's according to June's monthly survey of construction industry purchasing managers by research firm Markit.

And output grew strongly in the sector too, which has been boosted by a recovery in the housing market.

But there was also a warning from the supply side, which is struggling to keep pace with the construction revival, as materials prices hit a 2014 peak.

Markit said its UK construction purchasing managers index (PMI) hit 62.6 in June, up sharply from the previous month's 60.0 and significantly above the neutral 50.0 mark that represents no expansion or contraction in sector activity.

"The latest rise in construction employment was the fast since the survey began in 1997, which represents a remarkable yardstick of progress as the sector looks to recover the ground lost over the past seven years," said Tim Moore, senior economist at Markit.

Residential construction was the best performing sub-sector in June, as it has been for months.

This is because of a surge in demand for affordable UK housing amid a strengthening economic recovery and a market awash with cheap mortgages.

A serious shortage in housing supply coupled with higher demand is forcing up house prices, tempting home builders to up their output and chase the potential profits.

But this sharp upturn in work is putting heavy pressure on suppliers, particularly labour and materials.

For example, brick stocks are at historic lows. In the post-crisis slump in construction sector output, brick stocks were whittled down rather than added to – and now manufacturers can't keep up with demand.

"Whilst the headline figures this month painted a positive picture, let's not forget about the underlying pressures on building materials and manpower at supplier levels," said David Noble, chief executive at the Chartered Institute of Purchasing & Supply (CIPS), which helps Markit compile the surveys.

"Delivery times continued to lengthen a great deal and prices were pushed up. Pressure on suppliers needs to be watched if the sector wants to maintain a steady growth trajectory."