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Building industry frozen as supplies costs increase

Posted on Friday, October 1st by Pallet2ship logo

The current construction delays may affect the economy and also the Government’s “build back better” plans.

Builders have been put on stand-by due to a “perfect storm for construction” which is challenging the UK’s economic recovery, according to industry groups.

Building materials have seen their cost increased by 20 per cent, aggravating the problems faced by the industry, worth around £117bn to the UK economy.

Workforce shortages, delayed deliveries within the UK, alongside global supply crisis, and also the new Brexit bureaucracy, are already affecting construction projects across the UK and leading to price rises. 

Apart from increased supplies cost, global shipping delays and the lorry driver shortages are meaning that  many smaller building companies, which represent around 90 per cent of the sector (according to industry estimates), are forced to put projects on hold.

Building material costs have increased by approximately 20 per cent compared with last year, according to figures released by the business department. 

House builder Berkeley is one of the construction companies that warn about the effects of inflation on building supplies. It warned of “ongoing issues in the supply chain and labour market resulting from Brexit and the pandemic”, and said that, despite robust house sales, the “operating environment remains challenging” for the construction industry.

Construction represents around 6 per cent of the UK’s economy, and massive delays to projects could have a “knock-on effect on the recovery if construction companies aren’t completing projects quickly”, declared Andrew Goodwin, chief UK economist at Oxford Economics, a consultancy firm. 

“If people stop doing building work because they know they’ll face delays, that will start to have a real effect on the wider economy,” Mr Goodwin said. 

The logistics industry is already facing disruptions due to Brexit, and it has had to deal with different challenges during the pandemic due to sea and road freight issues, which has increased the costs for companies. The administration of the supplies is hard for small building companies, as they rely on day-to-day stocks at builders’ merchants, whereas bigger construction companies are able to store.

Considering all the aspects, the business department still hasn’t managed to find a solution to the problems.

Even if some of the issues, such as global shortages of certain products, are beyond the government’s control, there are measures that the government could consider to alleviate the actual issues, for example, by reconsidering the immigration system.

Brian Berry, chief executive of the Federation of Master Builders (FMB), said: “At a time when builders’ workloads are surging, the impact of material price increases cannot be overstated.

“The FMB’s latest membership survey reveals that 98 per cent of small builders are seeing prices rise, and they expect this to continue into the autumn. That’s why it’s so important that a fair share of materials are getting through to local merchants, and why the FMB has lent its support to calls to put HGV drivers on the shortage occupation list to ease the backlogs in distribution,” Mr Berry said. 

The construction crisis comes together with the government’s plan to “build back better”, and to push forward with efforts to upgrade the energy efficiency of UK homes in order to achieve its climate objectives.

According to Jonathan Portes, professor of economics at Kings College London, if government’s projects go ahead, investment in infrastructure will be at its highest sustained level since the 1970s. The government is taking advantage of low interest rates for borrowing to make “hardcore” investments in long-term infrastructure projects, he said.“But to invest physically, you do need to have construction workers on the ground,” Prof Portes added.

One of the biggest challenges faced by the construction companies is the difficulty to recruit skilled workforce, and also the failure of the Home Office to adjust the immigration system to the needs of industry, he added. Many workers, including those from Eastern Europe, are self-employed contractors, a group ill-served by the UK’s new immigration system.

“It’s actually quite liberal for employed people on medium and higher incomes,” Prof Portes said, “but there’s no provision for the self-employed.”

Source: The Independent

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