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Construction materials shortage: The battle of rising material prices

A lot has been going on in the last 12 months. Houses are selling like hotcakes, contractors are booked up to their eyeballs and those that have been unable to move house, or prefer to stay where they are have been considering extending their home.

Since Brexit, and the start of the Covid pandemic, there has been a huge shortage of building materials. This has also caused prices to rocket, increasing the prices of everything from wood and steel, to cement and glass. According to the Department for Business, Energy and Industrial Strategy’s (BEIS) Monthly Statistics of Building Materials and Components report, the cost of materials for ‘all work’ increased by 23.6% in September 2021 compared to September 2020.

Not only has this surge of work allowed contractors to be a little more particular about the work they choose, but it has also caused huge disruption for projects. For example, despite using a live database, a builder using one of our build cost estimates may not be able to rely on those material costs for long. 

Typically, builders are providing quotes for building projects that may start anywhere from three to 12 months after the quote is accepted. This means that with the volatility of material prices, builders need to recalculate the figures before starting a build, or pass the price increase to the customer when they have the final cost.

So what happens then? Either the builder has to swallow the difference from his profits, or recalculate the material prices almost daily. Unless a project is starting that day, the construction materials shortage is causing havoc with builds of all sizes. Naturally, the price increase is passed onto the customer, as the builder themselves only has a small margin for price fluctuations.

The building boom

During lockdown one, many of us were getting involved in home improvement projects. With major works, such as house extensions and new builds grinding to a halt, the release from lockdown meant that contractors were already behind on projects and were struggling to find space to take on new ones.

However, the building boom didn’t stop. Both working from home and lockdown restrictions produced a boom in DIY and home improvements which have continued long out of lockdown. As homeowners were spending more time than ever indoors, the need to expand their space (or somehow improve upon it) hit an all-time high.

If we take a look at the current housing market, very few houses are going up for sale, but the buyers haven’t gone anywhere. This has resulted in bidding wars, a huge boom in work for surveyors, solicitors and of course, contractors.

But how have all these factors affected the UK materials shortage?

Homeowners facing soaring material prices

According to RICS, housebuilders costs have risen by 1.7% in 1Q2021 and by 3.6% between 1Q2020 and 1Q2021. Of those surveyed, a whopping 94% reported increases in costs, with 44% reporting material increased and 37% reporting a rise in labour and material costs.

Unsurprisingly, contractors have become a little more selective about the work they do and the charges they price. According to RICS:

“Insulation, aggregates, timber and timber products, steel as well as shortages of building materials, higher costs of transport, energy and labour costs/availability remain among the key cost pressures mentioned by respondents.”

This increase in prices across labour and materials means that homeowners have to be prepared to pick up the bill for huge building costs across the country. New government figures show that key building materials, such as roof tiles, cement and steel are dwindling, impacting the construction industry hugely. 
The Department for Business, Energy and Industrial Strategy’s (BEIS) Monthly Statistics of Building Materials and Components report for October revealed that while month-to-month prices only showed a 0.1% increase between August and September, the cost of materials for ‘all work’ increased by 23.6% in September 2021 compared to September 2020.

Updates from suppliers

Unfortunately, the rapid increase in material prices has caused many homeowners to put a halt to their building projects. Very quickly, a budget of £30,000 can skyrocket as a result of rising material costs – especially where long lead times affect a build from even starting.

This means that builders and other contractors cannot guarantee a cost for long. For example, Jewson have been continuing to provide updates from their suppliers in order to keep their customers up to date with the latest material price increases.

According to their website, there are a variety of issues currently affecting the materials supply chain, including:

  • An increase in demand for kitchen appliances, such as microchips, combi and microwave ovens
  • A reduction in the availability of raw materials used in the production of PIR insulation
  • Unprecedented increase in market demand for cement
  • A spike in shipments of timber to America has reduced the availability of importing into Europe
  • Increased UK market demand for Gyproc Plasterboard and Gypframe Metal

Naturally, these material prices increase each year, at a far more gradual rate. However, these recent spikes have been tough for contractors and suppliers to battle against, with ever-increasing costs in raw materials, fuel, logistics and employment costs.

There is a multitude of factors that have contributed to these increases, including:

Shipping costs

With ongoing pandemic-related delays and closures around the world, demand has never been higher, elevating transit times and causing delays in supply chains. According to CNBC, the cost for a single shipping container has “skyrocketed”, with routes seeing cost increases by “seven times, if not more”.

In the same article, CNBC goes on to report that the surge in container freight rates – if sustained – could increase “global import price levels by 11%.”

With many popular brands struggling to fill their shelves, including high street supermarkets and stores such as IKEA, prices for many much-sought-after products are on the rise. With a lack of alternatives to ocean freight, it is hard to avoid surging transport costs.

Shortage of HGV drivers

For several months now, there have been concerns regarding deliveries of food, fuel and other items. According to the BBC, the Road Haulage Association (RHA) have claimed there is a shortage of more than 100,000 qualified drivers in the UK.

The Covid-19 pandemic isn’t solely to blame, however, with the overall estimated shortage at around 60,000 drivers pre-Covid. Overall, the difficulties in travel and importing goods and materials have been heightened by a lack of drivers, increasing shipping costs and the Covid-19 pandemic. Brexit has also played a role in the UK’s shortage of HGV drivers, with many European drivers returning to their home countries unable to return to the UK.

Fuel increases

According to The Guardian, UK fuel prices hit an eight-year high amid the fuel crisis. Furthermore, increasing energy costs have resulted in a spike in fuel prices being passed down onto customers, including those in the process of shipping crucial building materials.

All in all, these increases have been seen at every stage of the supply chain, resulting in daily-changing material prices that are passed from builder to customer.

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