According to the BCIS Materials Cost Index, the cost of construction materials has reached a 40 year high, and continues to escalate
Increased global demand in the construction sector, combined with the complex impacts of the pandemic have resulted in unprecedented shortages, delays and increased prices of materials and labour across the economy.
Within the UK, complications resulting from Brexit have exacerbated this situation, affecting all aspects of trade and labour availability. The repercussions are acutely impacting the UK construction sector.
Construction productivity has largely recovered from the initial shock brought by the pandemic and in some instances significant efficiencies have been achieved as a result of new working practices.
In June, a drop in productivity was reported due to sub-contractors self-isolating when contacted by the test and trace system.
Other factors affecting construction demand include significant lifestyle changes triggered by the pandemic, with many people continuing to work from home reassessing their housing needs.
A booming domestic housing market substantially increased demand in repair maintenance and improvement (RM+I) sector, combined with large infrastructure projects such as HS2, have all significantly contributed to a recovery in construction demand.
This is shown in the ONS’ construction statistics, which show that following a 12% drop in Q2 2020, construction output has increased by 9.7% in Q2 2021 compared to the same period last year.
Construction material demand
The provisional price adjustment formulae indices for timber, steel sections, and steel for reinforcement showed annual increases of 79.4%, 60.4%, and 80.0% respectively in September.
The decision of British Steel to add a temporary £30 per tonne surcharge on the cost of structural steel, due to a rising energy cost, will continue to escalate costs for steel.
With increasing reliance on imports to fulfil domestic timber demand and some timber-producing countries implementing log export bans, timber supply remains under pressure throughout the UK.
In November, BEIS Monthly Statistics of Building Materials and Components reported two of the top three construction materials with the greatest price change in the twelve months to September 2021 were imported sawn or planed wood (+73.3%) and particle board (+65.4%).
Brick deliveries across the UK are reportedly subject to extensive delays, with major manufacturers warning of significant price rises for pre-order due to extreme market volatility.
Since February 2021, IHS/Markit CIPS UK Construction PMI has reported increased prices and supply shortages of bricks.
Adding to this, HGV shortages and the sharp rises in wholesale energy prices mean the situation for brick, block and ceramics are unlikely to improve in the near term with serious repercussions to productivity and critical path, particularly in the residential sector.
‘Pressure on materials prices and availability expected to continue’
James Fiske, director of BCIS, commented: “The cost of materials in constructing a 3-bedroom semi-detached house has increased by 14% or approximately £7,300 between January and September 2021. It is expected to grow by further 1% or £600 by the end of this year.”
Joe Martin, BCIS lead consultant added: “The pressure on materials prices and availability is expected to continue at least until the end of 2022.
“Labour shortages are expected to evolve as the significant driver for overall construction cost increases next year and the construction sector would need to compete for it with other sectors”.