The construction industry is facing a 10 per cent increase in the cost of materials over the next year as it struggles to meet demand for housing and infrastructure projects, a survey has found.
In the Royal Institution of Chartered Surveyors’ quarterly survey of about 500 construction professionals, 82 per cent said that a shortage of materials was hampering the market in the second quarter — the highest level since the survey began in 2012.
Nearly two thirds of respondents also identified issues around labour shortages, with respondents citing a worsening scarcity of bricklayers and carpenters. A dearth of lorry drivers to transport materials, exacerbated by the pingdemic, has put additional pressure on construction projects.
Simon Rubinsohn, the institution’s chief economist, said: “Most notably at this point, the availability of building materials stands out as a key problem . . . but almost as significantly, labour and skills are increasingly being cited as obstacles for businesses looking to build out existing commitments or embark on new projects.”
Building materials have already risen by between 10 per cent and 15 per cent in price this year, with timber prices up by as much as 100 per cent, according to the Builders Merchants Federation. John Newcomb, its chief executive, said that in the past couple of weeks the industry had started to report some residential projects being cancelled or deferred because material price rises had made them unviable.
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“There’s no sign yet in the UK of any of this demand easing off,” he said. “Jobbing builders are still very busy as people are not travelling and are continuing to invest in their own homes, and the government has made clear that it wants to invest in infrastructure. HS2 will create a huge additional constraint on the supply of materials such as cement.”
Neil Farrance, director at Page Surveyors, in Tonbridge, Kent, said that material prices were “rising exponentially” and lead times were increasing.
The rise in materials costs is a threat to contractors that have committed to fixed-price contracts, which means they have to take on all of the risk of price rises. For commercial projects or residential developments, the price rises are expected to translate into higher rents for businesses and increased costs for homeowners who want to carry out renovations.
Brian Berry, chief executive of the Federation of Master Builders, said: “At a time when builders’ workloads and enquiries are surging, expectations of a 10 per cent rise in material prices over the next year paint a worrisome picture for UK builders seeking to recover from the pandemic.”
He said the federation was “urging consumer patience during what is a very difficult time for many local builders and stressing the importance of not compromising quality in favour of the unrealistic prices and timescales being quoted for projects by unscrupulous tradespeople within the sector”.
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Almost all of the federation’s members experienced material price increases in the last quarter.
The RICS survey found that the private residential sector had reported the biggest growth in demand, with a net balance of 50 per cent of respondents recording an increase in activity, up from 39 per cent in the previous quarter and the strongest reading in six years.
Workloads for infrastructure developments, led by energy projects, also grew, with a net balance of 45 per cent reporting an increase, compared with 34 per cent in the previous quarter. The proportion of surveyors expecting activity to increase reached its highest level since early 2016. Rubinsohn said that “infrastructure and private housebuilding are viewed as likely to remain the most buoyant areas of the industry”.
James Slater, a surveyor based in Cirencester, Gloucestershire, said that there was a “serious oversupply of mainly private domestic work”, with busy contractors “unwilling” to price or tender for work.
The outlook for profit margins improved slightly for a second successive quarter, according to the RICS survey, after nine consecutive quarters of negative expectations results. The survey recorded only a modest improvement in sentiment, however.
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John Lewis offers lorry drivers extra £5,000 a year
Lorry drivers at the John Lewis Partnership are to be paid an extra £5,000 a year as the retail group battles an industry-wide shortage of qualified truckers. From this Sunday, large goods vehicle drivers employed by Waitrose and John Lewis will be paid an extra £2 per hour. The “competitive” pay rise will provide an immediate boost to the 900 or so drivers on the group’s books. New joiners are being wooed with a “welcome payment” of £1,000, as long as they carry an HGV licence and are able to start before November.
