A global shortage of construction materials is hitting UK construction firms hard, with soaring prices and extended lead times impacting their ability to meet their contractual obligations.
According to monthly statistics from the Department of Business, Energy and Industrial Strategy, the cost of materials for repair and maintenance work rose by 15.6% in the year to June 2021. This is without mentioning the soaring costs of shipping due to the pandemic, which has seen the cost of shipping a 40ft container from Asia to Northern Europe increase from $1,500 in summer 2020 to more than $8,300 in May 2021, according to estimates from the Construction Products Association.
What materials are affected?
Timber – a combination of natural factors (a warmer-than-expected winter in Scandinavia affecting wood supply), customs difficulties and high demand have contributed to a global shortage of timber that dates back to the first lockdown in March 2020.
Steel – worldwide demand for steel is outstripping current production capacity, resulting delays to projects and leading British Steel to recently announce it had stopped taking orders on structural steel sections.
Plaster – three nationwide lockdowns have either closed factories or imposed such stringent social distancing restrictions that production of plaster has been severely hampered. This has been compounded by a home improvement frenzy in British homes up and down the country, sharply increasing demand.
Cement – supplies of bagged cement have been “particularly hard hit”, according to the Construction Leadership Council, although chief executive of the Mineral Products Association (MPA) says that deliveries of bulk cement, which makes up around 80% of UK supply, are broadly back to normal.
Why has the UK been particularly impacted?
While supply shortages are global, a combination of factors unique to the UK are exacerbating the problem.
Brexit: Firstly, additional bureaucracy and unfamiliar regulations are continuing to result in customs difficulties – and a knock-on effect on prices and lead times. What is more, a new certification mark, UKCA, will become compulsory for all goods being introduced to the UK market from January 2023, to replace the European CE mark. However, there are just 45 testing houses in the UK vs 700 in Europe!
Haulage driver shortage –15,000 fewer lorry drivers on UK roads due to Brexit, compounded by a backlog of 30,000 haulage driver examinations due to the COVID-19 pandemic, has resulted in a severe shortage of drivers that is “now a critical nationwide problem causing delays and impacting project programmes,” according to a joint statement from CEOs of the Builders Merchants Federation and the Construction Products Association, John Newcomb and Peter Caplehorn.
Pandemic-related demand – construction industry projects have surged since the easing of lockdown restrictions, not to mention significant demand stemming from home improvement projects.
How can construction firms mitigate the supply crisis?
According to a survey of construction firms by Travis Perkins, firms are already taking action to limit the impact of shortages on their business. More than seven in 10 respondents said they were using one or more suppliers to manage it, while 41% stated they were planning ahead and buying materials in advance. But what else can firms do to ride out the crisis?
In the long term, finance director of Sheehan Group, Tara Sheehan, has suggested that UK firms must embrace the use of recycled materials, with the country currently overrelying on raw materials and imported products. The company uses recycled aggregate, sand, concrete and blocks in its construction projects, which would otherwise be sent to landfill. Quite apart from reducing our reliance on the global supply chain, the use of recycled materials would greatly contribute to a greener industry.
In the short term, however, being mindful of the contractual obligations they are entering into and engaging in pre-contract discussions will help firms manage tight deadlines, in addition to the risk of abnormal price inflation.