Data for September 2021 revealed construction output volumes rising to the smallest extent for eight months.
Demand has softened from the peak conditions seen earlier in the summer and sites continue to be disrupted by shortages of transport, materials and staff.
A rapid drop in subcontractor availability was also reported, with subcontractor charges making their steepest rise since the survey began in April 1997.
As in the past couple of months, some respondents again commented on rising prices prompting clients to slow decision-making and delay contract awards.
The headline seasonally adjusted IHS Markit/CIPS UK Construction PMI Total Activity Index has been in decliner every month since June, when it peaked at 66.3. In September it fell to 52.6, down from August’s 55.2, moving ever closer to the 50.0-mark that represents zero growth.
All three broad categories of construction activity saw a loss of momentum in September, with the biggest slowdown seen in civil engineering (51.0, down from 54.8 in August).
House-building also decelerated in September, scoring 52.8, its lowest since the post-Covid recovery began in June 2020. This left the commercial segment (53.6) as the best-performing category in September.
September data indicated another strong rise in employment numbers across the sector, driven by greater workloads and stretched business capacity. However, the latest rise in staffing levels was the least marked since April, which partly reflected long wait times to fill vacancies.
However, construction firms remain optimistic about their wider prospects, with 51% forecasting rising output, and only 8% anticipating a decline.
Tim Moore, director at IHS Markit, which compiles the survey said: "September data highlighted a severe loss of momentum for the construction sector as labour shortages and the supply chain crisis combined to disrupt activity on site.
"The volatile price and supply environment has started to hinder new business intakes as construction companies revised cost projections and some clients delayed decisions on contract awards. As a result, the latest survey data pointed to the worst month for order books since January's lockdown.
"Shortages of building materials and a lack of transport capacity led to another rapid increase in purchase prices during September. There was also a considerable decline in the availability of sub-contractors, with survey respondents citing shortages of bricklayers, drivers, groundworkers, joiners, plumbers and many other skilled trades. Measured overall, prices charged by sub-contractors increased at the fastest rate since the survey began in April 1997."
Duncan Brock, group director at the Chartered Institute of Procurement & Supply, said: "Construction activity suffered another setback in September, as builders were hammered by staff and material shortages, delivery delays and higher business costs as this phase of the post-pandemic recovery became the shakiest for eight months.
"Housing and civil engineering bore the brunt of the slowdown with residential building the weakest since June 2020 during the early stages of the pandemic. The increases in shortages also affected project agreements with a sharp fall in new order growth, where customers hesitated to commit, uncertain about prices and the timing of completion. Over 60% of supply chain managers said their deliveries were taking longer and 78% were paying more for their goods as inflation remained stubbornly high.
"Good news for job seekers though as the demand for skilled labour remained unabated, and companies were left wanting more. Sub-contractors were unable to fill the widening gap of need as their availability shrank and prices charged accelerated to record levels. Unless stronger supply chain performance is nailed down along with headcount, we are heading towards a stagnant autumn because the sector is certainly not on an even footing at the moment."
Fraser Johns, finance director at construction contractor Beard said: “Today’s stats show the construction sector is still being significantly hampered by labour shortages and supply chain issues.
“With output volumes rising by the smallest extent for eight months, and a rapid drop in sub-contractor availability, strong relations with suppliers have never been more critical.
“To build these relationships and to reassure clients, contractors need to ensure prompt payment and regular collaboration with suppliers is fundamental to all projects.
“Inflationary price pressures and supply shortages continue to hinder new business, with clients re-considering decisions in the current environment. This may continue until such pressures begin to ease, a time period which is still unclear.”