Autumn 2021 UK Market Report
Materials
Data from the latest building materials and components released from the Department of Business, Energy and Industrial Strategy (BEIS) shows that material price increases have continued. Building materials for all work increased by 2.8 percent in the month to August 2021 and the ‘All Work’ material price index increased by 24.1 percent between February 2020 and August 2021.
Materials issues continue to have a significant impact including:
- Specified materials/products not being available
- Long lead-in times
- Material price increases
- Issues importing materials e.g. border delays
- Shortages of HGV drivers causing delivery delays and increasing costs
- Increased costs due to surging gas prices affecting industrial production.
Suppliers are regularly notifying price increases and cost increases are having a significant impact on projects. Data from the ONS shows that since July 2021, the construction industry had the highest percentage of all businesses who were either unable to procure materials, goods or services that they needed from within the UK, had changed suppliers or found alternative solutions to do so.
The majority of survey respondents see the issues with materials/products supply continuing to at least mid-2022, with 31 percent of respondents indicating the issues could last longer. Price rises seem to have slowed slightly compared with earlier in the year, however it is anticipated that the energy price escalation will have an impact. Generally, there are doubts that material prices will return to pre-pandemic levels due to the investment required to achieve climate targets.
Figure 11 dates relate to mid-point of waves.
Contractors are overcoming materials difficulties on projects with early/advanced orders, stockpiling materials, proposing alternative materials and resequencing/reprogramming works.
There is also evidence of some contractors fixing their price only once a start date has been agreed and requesting funds/surety before contract to reserve subcontractors.
Fluctuation clauses are not being widely used in the industry, with other methods being utilised to manage the cost risk. Alternatives include uplifts agreed for particular materials/packages and uplifts for inflation above agreed bands of increase.
There is concern that the ongoing materials issues will impact the construction industry’s ability to build sustainably to meet carbon reduction targets.
This is supported by 75 percent of survey respondents saying that materials issues will impact sustainable construction. Some concerns included:
- With the ongoing pressures on project cost and deliverability, sustainability will take a back seat
- Increased waste through downtime waiting for materials
- Reduced efficiency — using what can be obtained, not necessarily what is best
- Materials will be delivered from further afield to meet deadlines/targets
- Materials are being substituted to meet target deadlines and are not always as sustainable as the original specification
- Lack of material availability will drive prices higher, making sustainable product methods (already typically more expensive) less appealing to developers and clients, who themselves are seeing increased financial pressures in general business activities
- Increased costs will put further emphasis on capital costs of projects.
The majority of respondents saw that alternatives and redesign would be how sustainability targets can be met, given the current materials issues. Other suggestions were that technology, innovation and increased uptake and capacity will alleviate supply and financial pressures.
