Why are the cost of building materials still so high?
Supply chain issues are often cited as the root cause of rising building material costs in the UK. These nationwide issues are complex and have far-reaching effects across multiple industries.
A short sweep of this article from The Institute for Government gives an overview of some of the main reasons for supply chain disruption on a national level.
These include:
- Labour shortages
- Brexit Trade Barriers
- Global Supply Problems
- Panic Buying
The result? A frustrating shortage in construction materials that’s continued to escalate over the past 12 months – leading to a 24% rise in the price of building hardware over the same period.
Is there any good news out there? The answer is sort of. Thankfully, we are now seeing some early signs of recovery as the shortage of construction materials begins to slowly rebuild. Prices, however, continue to rise, blighting growth within the building industry, and effecting the day-to-day of the end customer.
The question is, why is this still happening?
Inflation.
Inflation is rising in the UK at its fastest rate in over 30 years. In July 2022, it reached 10.1%, surging fuel, energy, and food costs as a result. And unfortunately, it gets worse. If inflation continues at this rate, without government intervention, forecasts estimate a staggering 18% rise in 2023.
In an attempt to combat spiralling costs, the Construction Leadership Council (CLC) recently released an official statement, including the assertion that “the general view is that inflation will persist at a lower level across most categories for the rest of the year.”
Good news at last then – and thankfully an indication that things are set to improve. A fact further backed by July’s increase for all materials sitting at 0.6% in comparison to the 3.7% recorded in May.
Next on the list?
Energy Price Rises.
Energy price rises have heaped untold pressure onto construction firms within energy intensive services. As a result, industries including cement, steel and concrete have been forced to pass on the effect of rising operational costs.
British Steel are among several businesses to have increased prices in recent months, citing the impact of the rising costs of wholesale energy. Other companies, including Tarmac, have also recently started charging energy surcharges on selected energy intensive materials.
What does this mean moving forward? Well, Energy Saving Trust suggest that energy bills could remain high until 2024. Although, it’s difficult to tell as international gas prices continue to fluctuate.
Another contributing factor?
Ukraine Conflict.
Russia and the Ukraine are major exporters of raw materials, manpower, energy, and freight. Therefore, it comes as no surprise that this conflict has fuelled rising costs and effected supply chains across Europe and the rest of the world.
Maersk, a major freight carrier has stopped shipping lines to and from Russia and the Ukraine as a result. These freight services are also not allowed within a 200-mile radius of either country, causing a sizeable global shortage of empty freight containers, spiralling costs even further.
This increase has a knock-on effect for the end customer as manufacturing costs continue to cascade through supply chains down to the shop floor. For the time being at least, it seems we are bound to the external factors causing these rising costs for the next 18 months.
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