UK builders face material shortages after Covid disrupts supplies

UK contractors are facing shortages of building materials as the pandemic disrupts supplies and the sector enjoys a boom, squeezing margins and threatening to delay projects.

Timber prices have risen by more than 80 per cent in the past six months, while copper and steel have jumped by 40 per cent, according to the Construction Products Association, a trade body.

Costs of paints and varnishes are also up by 30 per cent, while polymers such as polyethylene and polypropylene have risen 60 per cent.

The warning on rising costs for contractors adds to concerns about inflationary pressures across the global economy, following cautionary messages on rising prices by some of the world’s biggest multinationals.

Noble Francis, economics director at the CPA, said the price rises and shortages were “already hitting contractors”.

He warned that smaller contractors were bearing the brunt of the price rises even though they were the least equipped to deal with them as they cannot order large quantities in advance and importers are focused on supplying the largest businesses. In an industry in which profit margins average about 2-3 per cent, this is a “major risk” despite strong demand, he said.

A shutdown last spring of raw material processing plants followed by a strong global recovery in construction made it difficult to replenish stocks in winter. A quadrupling of shipping costs to record levels in the four months to February has further pushed up costs for shippers, delayed freight deliveries and limited space on ships to send goods.

Meanwhile, stay-at-home policies and low borrowing costs across the world led consumers to spend heavily on home improvements and upgrading to bigger houses, resulting in soaring demand for goods and raw materials. That caught out supply chains that had been cutting costs and curtailing production in expectation of a prolonged collapse in demand. 

A series of freak events from extreme weather to fires at factories have exacerbated shortages of many products. The supply of polymers that are used in construction was affected by the big freeze in February in Texas that shut down as much as 80 per cent of petrochemical production capacity at its peak.

Brian Berry, chief executive of the Federation of Master Builders, said 82 per cent of its members were reporting increased prices and struggling to get hold of basic materials such as roof tiles, timber and insulation.

“Consumers need to be aware that the cost of their building projects may change in the months ahead,” he added.

Gary Olsen, director of Create for You, a south-east London-based builder that employs 11 people, said the cost increases were a “big worry” and he did not know “what the picture would look like” in six or nine months. He said he would try to include clauses to take account of this in future contracts, especially for big-ticket items such as bifold doors, in case the project costs rise sharply.

The cost inflation is a black spot in an otherwise positive picture, with the construction industry facing its fastest growth on record.

Construction was one of the hardest hit industries in the first national lockdown in the UK, with output falling by 41 per cent in April last year. But activity has recovered quickly since then, boosted by government stimulus for the housing and housebuilding sectors as well as for major projects in the infrastructure sector, such as the high-speed rail project HS2.

By the end of last year, monthly construction output in infrastructure and private housing were all above pre-Covid-19 levels. The CPA anticipates that housebuilding, infrastructure, warehouses and cladding remediation will drive 12.9 per cent growth in construction output this year.