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High Energy Costs – Steel, Glass And Aluminium Prices To Rise
Energy prices are now over 250% higher than they were in January 2021 and will likely keep climbing meaning steel, glass and aluminium prices will have to...
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Supply Chain Stumping House Building
Glenigan’s November Construction Index indicates continued construction decline with supply chain issues having the biggest effect on performance.
The value of underlying work commencing on-site during the three months to October declined 16% against the preceding three months and declined by 16% against the same period in 2020.
However, the value of underlying project starts increased in October, offering a small silver lining which should give the industry greater optimism going into 2022. It indicates the downward trajectory may well be a temporary setback opposed to long-term decline.
Residential
Residential project-starts fell 22% compared with a year ago as well as 20% against both the preceding three months and the three months to October 2019.
Private housing project-starts fell 22% compared with a year ago and by a quarter against both the preceding three months and the three months to October 2019.
Social housing work starting on-site fell 7% against the preceding three months to stand 20% lower than a year ago. Social housing project-starts were only 4% lower than the same period in 2019.
The Glenigan report says ‘the ongoing global shortage of building materials will have put considerable pressure on housebuilding, causing start delays nationwide. Whilst this persists, it will continue to have a negative impact on the residential sector’.
UK RICS Construction Survey – Q3 2021
Supply chain disruption, material price inflation and a shortage of skilled labour continued to intensify in Q3 2021 according to a survey of experts and professionals working in the construction sector by the Royal Institution of Chartered Surveyors (RICS).
The Institution notes that infrastructure projects are flourishing – but those projects are causing supply chain issues elsewhere and drawing labour and thus contributing to a skills shortage in other construction sectors.
Indeed, the availability of construction materials was the biggest challenge cited amongst respondents as supply chains across the UK struggled to re-establish themselves post-Brexit and pandemic. In the final quarter of 2019, just 14% of respondents indicated that this was an issue for them. Fast forward to Q2 2021 and it had jumped to over half of all respondents identifying this issue and, since then, it has continued the rise. These results also show that 89% of contributors believe this to be a problem, which is the highest proportion since the survey began in 2012.
People
Alongside materials, there are increasing concerns about being able to source sufficient people with necessary construction skills. In the latest survey, labour shortages were cited by over 80% of respondents which compares with two-thirds in Q2 2021 and 42% in the first three months of the year. Respondents said bricklayers appear the standout problem with 69% of contributors drawing attention to shortages of this particular skill but carpenters, plasters, electricians and plumbers are not far behind.
Profit warning
There were fewer positive expectations around profits recovering amongst construction firms given the increases in material prices across the sector. Tender prices are projected to increase by close to 5% over the period, with materials costs viewed as likely to rise by around 8% - posing a headache for construction firms as this could make the delivery of some projects unviable.
Energy & environment
Respondents reported a reluctance for anyone to adopt green building designs or carbon neutral construction practices. Added to this, 56% of respondents confirmed that biodiversity was not taken into account at all or in fewer than half of the schemes on their books.
2022
Simon Rubinsohn, RICS Chief Economist, says: “Activity remains strong in the construction sector with infrastructure projects, including the Thames Tideway Tunnel, Hinkley Point C and HS2, continuing to drive momentum alongside residential developments. “The impact of these trends on costs is expected to continue through the coming year.”
Picture: Supply chain, labour and energy costs are hitting the construction sector.
Article written by Cathryn Ellis
10th December 2021