A slight slowing of the market over the summer holiday months has resulted in product availability broadly improving.
Some issues remain, with extended lead times continuing for aircrete blocks, bricks, gas boilers and various items containing semi-conductors and other electronics.
The latest statement from the Construction Leadership Council’s Product Availability working group states that price inflation remains the biggest issue for the entire industry and further significant increases in inflation are anticipated due to energy, raw material and labour cost rises.
The group also notes that although the UK Government’s recent announcement of a six-month energy price cap for business users will help manufacturers here to some degree, the risks around supply and cost of energy threaten manufacturing throughout the EU.
“While EU policy-makers wrestle with their own solutions, the possibility of factory shutdowns on the continent may lead to shortages of products, materials and components exported to the UK,” said John Newcomb, CEO of the Builders Merchants Federation and Peter Caplehorn, CEO of the Construction Products Association, co-chairs of the working group.
“The root cause of the problem affecting smart meters, electrics, white goods and gas boilers is set to continue into 2023 as sub-component manufacturers struggle to secure supplies of semi-conductors and electronic components in a highly competitive market. Electrical component shortages are similarly affecting manufacturers in the wider electrical sector, likely to lead to reduced availability and increased prices.
“Lead times for most roof tiles are improving. Separately, we are concerned to hear increasing reports of ungraded and poor battens being stamped as standard. Contractors are warned to ensure that correct battens are being used.
“High demand for bricks, particularly for new housing, continued over the summer and led to reduced stock levels. This pattern is expected to continue in September, but manufacturers are delivering to agreed schedules with customers. Energy price hikes present a further challenge to both domestic and imported bricks, although Government support may ameliorate this issue for UK manufacturers. Aircrete supply has been compounded by a production issue at one of a major manufacturer’s sites, which meant deliveries were reduced in August.
“Uncertainty around energy supply in Europe could also impact raw materials for paints and coatings, which are already affected by raw material shortages. Medium-term, there is a need to amend the UK REACH registration process to ensure chemical registration is not made so difficult and expensive that UK manufacturing loses access to key substances for products.
“Overall steel supply has improved, but the EU has completely filled their quotas from non-EU countries, including the UK. Heavy sections cannot be transported from the UK mainland to Northern Ireland without incurring tariffs.
“Rising energy costs are likely to affect timber prices as we move into Q4 and Q1 2023. There are good stocks on the ground of both structural softwood and wood based panels, but stocks at ports are much lower and buyers will need to consider forward purchases to ensure the specifications they require are available through to year end and into 2023. Price pressure eased considerably over the summer but log prices remain firm as demand for pulp and paper, pallets and fuel wood is currently very strong throughout Europe. With energy costs rising, forward replacement prices for structural softwood are unlikely to be at current UK levels.
“The effect of high inflation and softening demand has seen shipping output and punctuality improve, and costs for some key UK routes down by a third since the beginning of the year. It is too early to gauge the impact on the construction sector of industrial action at Felixstowe, but we know that some businesses are suffering logistical headaches and added costs owing to re-directed deliveries. This Group will also monitor the two-week strike planned for 19 September at Liverpool’s port, Britain’s fourth largest.
“Finally, we are saddened to note that the year to June recorded the highest annual level of insolvencies amongst UK construction firms since the financial crisis over 10 years ago, despite strong demand throughout the first half of the year. The key risk going forward, given the substantive rise in insolvencies, is to what extent sharp cost rises and slowing demand over the next six months will exacerbate the rise in insolvencies.”
