UK Construction Market Report 3Q 2023
Materials
Three-quarters of our survey respondents said that the trend of materials prices settling continued in 2Q 2023, although the figure was slightly down on our last survey, looking at 1Q 2023.
The ‘All work’ Construction Materials Price Index from BEIS saw small increases between January and May 2023 — a total increase of 3% in the period. This demonstrates significantly less volatility than in 2022, which saw a rise in the index of 11.7% in the equivalent period following Russia’s invasion of Ukraine. A reduction of 1.3% is seen in the index in the month to June 2023.
The index peaked in July 2022. Figure 23, which uses data from BEIS and ONS, shows that while significant reductions occurred between July 2022 and June 2023 for materials including fabricated structural steel, concrete reinforcing bars and timber, other products saw increases.
Overall, prices are stabilising but remain elevated compared to pre-pandemic levels — the ‘All work’ Construction Materials Price Index is 42.3% higher in June 2023 than in February 2020.
Increases are generally more predictable and less volatile. Price fixing is less of an issue now, with reports of quotes for steel and cladding, (which previously saw significant issues), showing validity until around Christmas. Some survey respondents reported savings to contracts, where materials risks priced in 4Q 2022 did not transpire.
Despite reduced volatility, price increases still occur for some materials.
Concrete
The price for ready-mixed concrete rose by 10.2% between January and June 2023, according to ONS/BEIS data. There are also pricing pressures for green alternatives to cement, such as Ground Granulated Blast-furnace Slag.
Steel
British Steel recently announced a £30/t price increase on structural sections, with Construction Enquirer reporting that the producer blamed sustained high levels of raw material input costs over recent months. However, steel has seen reduced costs as demand has faltered and the increase may not necessarily stick.
MEPS International reported that European steel mills have tried to change tack following their aggressive pricing approach failing to stimulate new opportunities. They are now attempting to raise prices in the hope that it will encourage spot buyers to return to the market. Europe’s leading steelmaker sent a letter to its customers on 1 July advising of an immediate €30/t increase for its long product range. However, stocks remain high compared to current usage and with the holiday period, many purchasers can wait and reassess the market after the summer.
Looking ahead
The Construction Leadership Council’s (CLC) Product Availability Statement published on 14 June highlights that “although many larger manufacturers of energy intensive products have begun hedging their energy contracts into 2024, the costs of those products will likely remain elevated compared to the levels seen before the outbreak of war in Ukraine”.
The CLC is monitoring drought condition’s impact on critical logistics routes and shipping volumes from Asia and through the Panama Canal.
Most of our survey respondents, 85%, said that improved materials/product availability continues in 2023.
Generally, lead-in times continue to improve, but engaging early and considering advanced orders where appropriate remains beneficial. Reports of isolated issues include some mechanical and electrical plant and imported floor finishes.
The CLC’s June Product Availability Statement echoed this, “Once again there is good availability of most building materials across the UK”. It noted that rock mineral insulation was on allocation, but it expected supplies to normalise due to increased production capacity. It also highlighted reports of plasterboard and roof tiles being on allocation but suggested that these were localised issues or limited to a small number of manufacturers.
Respondents noted that the improvements in materials and product availability are reflected in tendered construction programmes as they now appear to be generally in line with pre-inflation levels. Also noted were fewer caveats within tender returns.
It is worth highlighting a threat to programme — utilities continue to be a risk, with some areas seeing providers not committing to a programme to install new incoming supplies.
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