UK Construction Boom Held Back By Shortages

Construction output grew at its fastest pace in seven months in August but the boom in activity is being held back by supply shortages.

The monthly Markit (NasdaqGS: MRKT - news) /CIPS purchasing managers' index (PMI) for construction showed that output grew in each of the housing, commercial and civil engineering markets and hiring neared a new record.

But Markit's chief economist, Chris Williamson, said the survey highlighted a big concern on the sustainability of the recovery's upward trend.

He said: "The pace of growth is causing supply problems, with the availability of materials and subcontractors deteriorating at record rates.

"Sub-contractors were able to charge more in the face of such strong demand, and average pay rates rose to the greatest extent seen in the survey history.

"Material costs meanwhile likewise showed the largest jump for just over three years as demand outstripped supply."

The report suggested that construction companies were still suffering the effects of the financial crisis which forced them to offload workers while production of materials such as bricks slowed dramatically.

The industry only began to grow strongly last year helped by the economic recovery, low interest rates and programmes designed to boost demand for homes.

Separate studies had previously warned that the recovery would be hampered by a lack of skilled workers as many secured jobs in countries such as Australia where construction was still booming.

Construction of new homes in the UK remains below levels needed to meet demand - assisted by Help to Buy.

The Government confirmed on Tuesday that 48,393 homes had been bought under the scheme.

The figures include both the Help to Buy equity loan scheme for England and the UK-wide Help to Buy mortgage guarantee scheme, which launched last autumn.

The equity loan scheme is aimed at new-build homes only.

One of the country's biggest housebuilders, Redrow , reported that more than a third of its properties had benefited from Help to Buy.

Pre- tax profits were £132.6m in the year to June - a rise of 91%.

Redrow (LSE: RDW.L - news) said its order book was up by 85% and it had taken on 21% more employees to meet demand.

However the company's debts increased by £82m, partly to help fund land purchases.