Has your firm been affected by high building material prices in the past year? Have construction material shortages impacted your projects? These interlinked problems are causing serious headaches right across the industry.
So, what’s behind these building material supply problems, which items have increased most in price…and how can you adapt?
Why are building materials so expensive right now?
There are multiple factors behind both the shortages in construction materials and their high costs. In most cases, these factors are closely interlinked. Some of the key reasons for high building material costs and shortages include:
- War in Ukraine
The conflict has triggered a massive surge in energy prices across Europe, which means the feed-in costs for factories that make building materials have gone up. At the same time, Ukraine is a major supplier of steel but can no longer manufacture or export it. And Russia – which also exports various building products and raw materials – is facing sanctions that ban many of its exports.
- The pandemic and pent-up demand
COVID-19 lockdowns and the rise of ‘work from home’ meant many people reassessed how and where they work, and this led to a rise in demand for home renovations. Many people found they saved a lot of cash during the lockdowns, and therefore had more money to spend on home improvement. This means builders are busier than ever, leading to a competitive market.
Leaving the European Union also affected building material costs in the UK – extra checks and delays at the border mean time to market is longer, and prices have increased as a consequence.
- Global supply chain issues
Practically every building material – from timber production through to high tech chips used in construction equipment – has been hit by supply chain snarl ups in the past two years. Once again, these delays add to costs, and a situation where the highest bidder wins.
The UK’s inflation rate is hitting highs we haven’t seen in decades. Inflationary pressure also weighs on building material prices.
- Tight labour market
There has long been a shortage of construction workers in the UK, and this has only been exacerbated by the pandemic (many took early retirement) and Brexit (many workers chose to return to their home countries).
Building materials price increase 2022 in the UK
So, just how much have construction materials risen in price?
According to the latest data from the BCIS Material Cost Index, annual price increases for construction materials have risen over 20% since 2020 – as the following graph shows:
These building material price trends for 2022 would be bad enough. But, dig into the data for specific materials and the picture gets even worse.
The following price movement chart for building materials shows increases in 2021 (2022 data is not yet available) – the reality is that most of these prices will have increased further.
While these charts make for grim reading, there are some potentially positive building material price trends in 2022. The HomeBuilding news website reports that monthly increases in building material costs seem to have reached a plateau this summer, with monthly increases of 0.6% in July, down from 1.3% in June and 3.7% in May.
When will building materials go down in price?
The short answer is that we simply don’t know. As noted above, the price increases seemed to reach a plateau this summer, and procurement teams and supply chain specialists have been working hard to find alternative sources of many products.
However, since demand is so high around the world, we can expect prices to remain elevated for at least a couple more years. And, because many of the shortages are driven by geopolitical factors (be that the war in Ukraine or China’s zero-COVID policy) predicting when these shortages will end is simply not possible.
Learn more: Calculating construction costs in the UK
What does the UK construction materials shortage mean for builders?
According to the BCIS, the costs of building a standard three-bedroom semi-detached home increased by 14% in 2021 – equivalent to £7,300. For both large contractors and small building firms, these increased prices, material shortages and general uncertainty will have already had profound consequences:
- For projects which began before 2020 with fees locked in, contractors will now most likely be working at a loss. For some at least, bankruptcy is a serious threat.
- Longer lead times on sourcing materials mean that many projects are likely to be delivered significantly later than planned.
- Most builders will be forced to pass on higher costs to customers.
Adapting to a world of higher building material prices
There is no doubt that the current construction materials shortages and high prices will have serious long-term consequences for UK builders. While there’s no ‘silver bullet’ solution here, the following suggestions may help with managing costs during this challenging time:
- Consider working collaboratively with other builders to pool and share resources
- Make sure all designs, plans and costs are agreed in advance, and avoid revisions
- Communicate with customers to ensure they understand the causes of changing material prices (feel free to share this blog!)
- Use alternative materials where possible
- Use technology like PlanRadar to boost productivity and efficiency on sites, while also reducing the risk of rework
While many of the underlying factors that are causing high building material costs are out of the industry’s control, there are still plenty of things we can do to adapt and make this price increases more manageable. Good luck!