New orders soaring in April – the fastest rise since 2014, but cost inflation is spiralling too
Following the release of this month’s UK Construction PMI report, it’s clear that the recent trend of increasing growth and high underlying confidence has continued in April. The industry has experienced just under a year of monthly growth resulting in new jobs being created at the fastest rate in more than six years.
This positive activity story with its promise of sustainable growth for the rest of 2021 is, however, tempered by the continuing pressure on supply chains. Demand and supply imbalances are continuing to contribute to materials lead times (steel, timber and logistics in particular) lengthening further than at any time since this PMI data was first published nearly 15 years ago. Cost inflation, predictably, is booming with its fastest rate of increase, again, since 1997.
The challenge facing the industry in order to exploit the clear opportunities to maintain strong growth, productivity and profitability is to build resilience back into its supply chains. The VAT Reverse Charge is not going to help. There are business failures to come – many construction companies simply no longer “have enough wool on their backs” to meet the cash flow challenges until the margin comes in.”
For more information and advice on the recovery of the construction industry in 2021, please contact me directly on David.Vayro@primaslaw.co.uk.