Hold on tight, we’re expecting turbulence!

Russia’s devastating invasion of Ukraine and the deepening cost of living crisis continue to challenge the market and market confidence.

Office for National Statistics (ONS) data shows that consumer price inflation reached 9.4% in the year to June, with the Bank of England expecting inflation to reach 13% later this year.

The pressures behind the largest consumer price inflation rates since the 1980s impact construction as much as the wider economy.

Spikes in energy prices on the global markets have caused significant cost escalation of materials and products, with the Department for Business Energy and Industrial Strategy’s (BEIS) All Work Material Price Index showing that 12.1% of the 27.2% increase in the year to May 2022 has occurred since February.

Increased living costs are adding further strain to budgets. Of contractor respondents to our survey, 88% said that they had experienced issues with labour supply over the past quarter, with a massive 96% reporting increases to rates in the same period.

There is concern this is affecting market confidence with over a quarter of contractors predicting tender opportunities will decrease in the third quarter and eight out of ten seeing projects stall.

However, a strong pipeline of work is anticipated in the longer term, thanks to an increasing focus on energy security and defence. The recent record-breaking extreme temperatures also highlighted the need to achieve net zero as soon as possible, along with signs that society will need to adapt.

There is also hope that materials and product price increases will stabilise thanks to levelling/reducing commodities costs and weaker demand. Although with the fear that constrained gas supplies from Russia to Europe will result in energy rationing and spiralling energy costs as alternative supplies are sought, we are not likely to have seen the last of price rises.

Of our survey respondents, 75% said they had witnessed greater collaboration to overcome the challenges. This spirit will need to continue to deliver projects and much-needed outcomes.

Investment in and adoption of new technologies are also critical, as well as ensuring the best use of resources.