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PwC respond to the S&P Global / CIPS June UK Construction PMI

06 Jul 2022

Toby Banfield, Restructuring Partner at PwC, reflects on the June PMI Construction Index, released today:

“June’s results follow the downward trajectory of the Index over the last four months. More specifically, the continued fall in the strength of business confidence could be reflective of the increase in the number of insolvencies in the construction sector during the first half of 2022. This is not a surprise given construction firms often work to fixed price contracts and as they continue to encounter huge input price inflation on materials, delays in supply chains and a shortage of labour, and in tandem with the current energy prices, it creates an environment that makes fixed price contracts loss making.”

“Although clients are reporting that demand remains high and order books are strong, pressures are building on price and availability. Material suppliers are reporting more overdue payments and in many cases price inflation is so significant that suppliers are only holding quotes for 24 hours. Construction firms are then being asked to make payments up front to secure a price, which is subsequently impacting their cash flow.”

 

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