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Inflation and supply chain crunch plague UK builders in third quarter

Inflation and supply chain crunch plague UK builders in third quarter
Rising prices of raw materials and the difficulty in sourcing them for jobs contributed to the overall fall in the quarter, according to a new survey. Photo: /Luke MacGregor/Reuters

The UK's construction sector was held back in September by cost pressures and chaos in supply chains, according to new data.

ONS construction output figures published on Thursday showed that the annual rate of construction output price growth was 5.1% in September 2021. This was the strongest annual rate of price growth since records began in 2014.

The increases were most pronounced in new housing (7.5%) and private industrial new work (6.3%).

Alongside this, quarterly construction output fell 1.5% in the third quarter (July to September) 2021, compared with the second (April to June). New work decreased by 0.3% and repair and maintenance fell by 3.6%.

As such, total construction new orders fell 9.2% — equivalent to £1.2bn ($1.6bn) — in the third quarter, compared with Q2.

The ONS said that across Q3, anecdotal evidence received from survey returns to the Monthly Business Survey for Construction and allied trades suggested that the rising prices of raw materials such as steel, concrete, timber and glass, along with the difficulty in sourcing these materials for jobs contributed to the overall fall in the quarter.

Anecdotal evidence also suggested supply chain issues were a factor for many contributors, stating that while order books were healthy, the availability of certain construction products was affecting projects currently underway.

Read more: UK economy grows in September but recovery slows

The news comes alongside new data from the Royal Institution of Chartered Surveyors (RICS) that showed house prices in the UK continued to rise in October due to lack of new properties listed for sale.

According to the RICS UK residential market survey, 70% of respondents saw a rise in property prices, with the trend expected to continue over the next three months, and year ahead.

Despite a 10% rise in the number of new enquiries, estate agents only have an average of 37 properties on their books, the figures showed. Meanwhile, 20% of contributors reported a fall in the number of new properties being listed for sale.

Last month marked the first after the end of the stamp duty holiday, a tax break designed to prop up the housing market and help consumers as the economy contracted during the COVID-19 lockdowns.

Watch: What is inflation and why is it important?