The shortage in construction materials is likely to continue creating supply chain pressure going into 2022 and beyond, but despite recent reports suggesting otherwise, suppliers have been reporting an easing of supplies and have been recording higher profits on their stock. We address the question why are building material prices increasing and what you can do about it.
Recent Updates on Building Material Shortage
A statement from the Construction Leadership Council indicated that construction material costs are continuing to rise. The average increase is 10%, but energy-intensive items are expected to rise by 20%.
The demand for certain building materials, such as bricks and roof tiles, is so high that product shortages have impacted deliveries. This trend is expected to continue into the spring.
For instance, British Steel has announced that the price of all their Structural Sections will be raised by £250 for immediate effect. They justify this increase due to rising energy prices, as well as cost-of-living increases over the past three months. They expect these costs to continue to rise.
Impact of Russian-Ukraine Conflict on Construction Materials Prices
The limited supply has therefore resulted in building material prices increasing along with longer lead times. This, in addition to the rise in concerns over the Russian-Ukrainian conflict, has further exacerbated the issue of rising prices.
According to the co-chairs of CLC, “…sanctions against individuals with links to the regime in Russia and firms with Russian ownership may affect the UK supply chain” which can in turn affect the construction material prices. Although only a small percentage of the UK’s construction supplies are imported from Russia, Ukraine, or Belarus, the working group said there were still indirect effects of the conflict.
Reasons for building materials shortage
Due to increased construction and renovation in Europe during the first quarter of 2020, an estimated 25% of construction material factories were idled or shut down. The shortage was attributed to a dwindling supply of raw materials stemming from many different sources including the energy crisis, living standards improvement and the Ukraine conflict.
This was further worsened by the fact that distributors couldn’t keep up with the demand for necessary building materials as well as a lack of competitive pricing.
Other factors affecting the price include:
Lack of lorry drivers
In the UK, there is approximately a shortage of 850,000 HGV drivers which is causing a disruption in the moving of supplies across different parts of the UK.
Challenges in labour supply
According to the trade survey conducted by the Federation of Master Builders (FMB), 82% of builders have delayed jobs due to a shortage in building materials, whereas 60% of construction were on hold due to shortage in less tradespeople available for work.
As such, the labour rates have increased sharply in some areas. Some trades are quoting higher rates because they are overwhelmed. This is due to the sheer demand placed on them to increase their availability.
Uncertainty due to Brexit
The knock-on effects from Brexit still remain given that approximately 60% of imported construction materials used in the UK comes from the EU.
Additionally, it has become harder to get back the EU workers that left the UK during the pandemic. According to Noble Francis from the Construction Products Association (CPA), this is due to the new immigration system which came into effect in January 2021.
“The small builders and specialist contractors are likely to be the worst affected by this as they are the least likely to have the resources available.”
Raw Materials
There has been a shortage of raw materials, global demand and other external factors. This slowdown continues to constrain production in certain products, packaging for insulation, paints, and adhesives. These factors have led to an increase in the demand for certain raw materials and thus increase in prices.
Hedging against the rising prices
If you’re currently in the middle of construction or plastering work, it’s important that you plan as far as you can to ensure you have enough supplies and don’t face any shortages.
CLC also advises homeowners to explore the options of working with tradesmen who have planned their supply chain in advance and communicated their requirements.
Additionally, it is important to be patient and respectful of your builder, to trust that they know what they are doing and allow them to do their job without interruption. Damages, delays and unexpected costs in the building process can get expensive, so be very careful in choosing a builder who you can trust will deliver on time, to budget, and with the quality that you would expect.
The shortage in construction materials is likely to continue creating supply chain pressure going into 2022 and beyond, but despite recent reports suggesting otherwise, suppliers have been reporting an easing of supplies and have been recording higher profits on their stock.
Recent Updates on Building Material Shortage
A statement from the Construction Leadership Council indicated that construction material costs are continuing to rise. The average increase is 10%, but energy-intensive items are expected to rise by 20%.
The demand for certain building materials, such as bricks and roof tiles, is so high that product shortages have impacted deliveries. This trend is expected to continue into the spring.
For instance, British Steel has announced that the price of all their Structural Sections will be raised by £250 for immediate effect. They justify this increase due to rising energy prices, as well as cost-of-living increases over the past three months. They expect these costs to continue to rise.
Impact of Russian-Ukraine Conflict on Construction Materials Prices
The limited supply has therefore caused a surge in the prices of construction materials and longer lead times. This, in addition to the rise in concerns over the Russian-Ukrainian conflict, has further exacerbated the issue of building material prices increasing.
According to the co-chairs of CLC, “…sanctions against individuals with links to the regime in Russia and firms with Russian ownership may affect the UK supply chain” which can in turn affect the construction material prices. Although only a small percentage of the UK’s construction supplies are imported from Russia, Ukraine, or Belarus, the working group said there were still indirect effects of the conflict.
Reasons for building materials shortage
Due to increased construction and renovation in Europe during the first quarter of 2020, an estimated 25% of construction material factories were idled or shut down. The shortage was attributed to a dwindling supply of raw materials stemming from many different sources including the energy crisis, living standards improvement and the Ukraine conflict.
This was further worsened by the fact that distributors couldn’t keep up with the demand for necessary building materials as well as a lack of competitive pricing.
Other factors affecting the price include:
Lack of lorry drivers
In the UK, there is approximately a shortage of 850,000 HGV drivers which is causing a disruption in the moving of supplies across different parts of the UK.
Challenges in labour supply
According to the trade survey conducted by the Federation of Master Builders (FMB), 82% of builders have delayed jobs due to a shortage in building materials, whereas 60% of construction were on hold due to shortage in less tradespeople available for work.
As such, the labour rates have increased sharply in some areas. Some trades are quoting higher rates because they are overwhelmed. This is due to the sheer demand placed on them to increase their availability.
Uncertainty due to Brexit
The knock-on effects from Brexit still remain given that approximately 60% of imported construction materials used in the UK comes from the EU.
Additionally, it has become harder to get back the EU workers that left the UK during the pandemic. According to Noble Francis from the Construction Products Association (CPA), this is due to the new immigration system which came into effect in January 2021.
“The small builders and specialist contractors are likely to be the worst affected by this as they are the least likely to have the resources available.”
Raw Materials
There has been a shortage of raw materials, global demand and other external factors. This slowdown continues to constrain production in certain products, packaging for insulation, paints, and adhesives. These factors have led to an increase in the demand for certain raw materials and thus leading to building material prices increasing
How to hedge against the building material prices increasing?
If you’re currently in the middle of construction or plastering work, it’s important that you plan as far as you can to ensure you have enough supplies and don’t face any shortages.
CLC also advises homeowners to explore the options of working with tradesmen who have planned their supply chain in advance and communicated their requirements.
Additionally, it is important to be patient and respectful of your builder, to trust that they know what they are doing and allow them to do their job without interruption. Damages, delays and unexpected costs in the building process can get expensive, so be very careful in choosing a builder who you can trust will deliver on time, to budget, and with the quality that you would expect.
At Ralph Plastering, we understand how troublesome the material shortage could be, especially if you are still planning to start a construction project. Over the years, we have helped worked on several plastering projects amidst varying challenges.
Give us a call and we’ll be more than happy to help you out! Whether it’s material shortage or any other challenge you might have, we can help you through. If you would like to learn more or plan ahead for an upcoming project, then please feel more than welcome to contact our team and book a consultation today!
