Construction materials shortage could worsen due to Ukraine war
The construction materials shortage is set to worsen in the UK as the Ukraine war escalates and energy prices continue to soar.
Industry groups and contractors are warning that Russia's invasion of Ukraine will lead to significant disruption to supply chains, which could lead to price hikes for a number of building materials.
These delays could impact those working on self build, renovation and extension projects because projects simply may be unable to complete on time.
Brian Berry, chief executive of the Federation of Master Builders (FMB), said: "As a result of Russia’s actions, supply chain disruption and the reallocation of certain types of materials will intensify the situation, with oil, steel, aluminium, timber and copper all set to be some of the worst affected.
"At a time when costs are surging, it puts builders in the unenviable position of having to raise costs for a customer base that are tightening their belts. Pragmatic policy delivery from government to help ease pressures on the sector and consumers alike will be needed.”
The Construction Leadership Council (CLC) adds that the imposition of sanctions on Russia will likely have an "enormous" impact on global trade, but stated that the effect of the war on the building material supply in the UK is still to be determined.
Energy price rises, however, remain a big concern, the CLC says. "Price inflation, largely caused by a shortage of raw materials, rising energy, freight, and labour costs, is of greater concern than availability."
What's the Latest With the Construction Materials Shortage?
Dwindling supplies of key building materials such as roof tiles, cement and steel impacted the construction industry throughout 2021, and prices rocketed up across several materials.
But in an initial boost for homebuilders earlier this year, the market was no longer experiencing extremely high levels of demand for materials such as timber and plasterboard. And there was progress with getting more HGV drivers on the road to deliver building materials, the CLC said in January.
Supply challenges have continued to affect a number of materials, however, including bricks, roof tiles, steel lintels and certain sealants, coatings and paints.
Ofgem's February announcement of new energy price rises from April will see average bills increase by 54%, and this could put pressure on construction firms due to energy intensive industries including concrete, steel and cement passing on the impact of higher prices.
Explaining the contractual situation some construction firms could face, Jeff May, director of government relations at the Construction Products Association, said: “Most manufacturers work on energy forward contracts and hedge to a certain extent so there tends to be a lag between energy cost rises and the impact on product costs.
“It may well take some time before they can ascertain the impact beyond the contract periods they’re currently working within.”
The CLC warned earlier this year that high energy prices would impact on the year ahead. Price inflation could potentially increase from 7-10+%, with multiple increases expected for some products.
The FMB has called for a cut in VAT on energy-efficient improvements, which it says would reduce project costs as well as protect the economy from spiralling energy costs.
Shortages of materials including bricks, roof tiles and plastic products could worsen if Ukraine war causes further increases in energy prices, which could drive inflation on the cost of products used on UK construction sites.
And while the CLC reports that the region including Russia, Ukraine and Belarus only accounted for only 1.25% of building products imported into the UK last year, it warned: "There are likely to be higher levels of direct and indirect exposure to some product components either through raw materials such as aluminium, copper, bitumen [...] or through higher prices in more-exposed European markets."
However, the latest UK Construction PMI this month revealed the largest construction activity output in eight months, which could help to mitigate the impact of supply chain disruption.
Brendan Sharkey, head of construction and real estate at MHA said : “The UK construction sector has got a good wind in its sails. Inflation is a very grave concern but there are real strengths underpinning demand for new-build housing. In addition we’re starting to see that Brexit, although painful, has already led to businesses in the sector diversifying their supply chains. This stands them in good stead to weather the economic shocks of Russia’s invasion of the Ukraine."
Which Materials are Affected?
Long lead times remain for both concrete and clay roof tiles, averaging around 20-24 weeks, but can be up to 36 weeks for some products, according to the National Federation of Roofing Contractors (NFRC).
Bricks and blocks
There are "ongoing challenges" with bricks and blocks supply, the CLC says, and demand is expected to be strong well into 2022. This could be a longer-term issue, with the Brick Development Association suggesting that is demand expected to remain high, and lead times will continue be a problem.
Some electrical products, particularly those using semi-conductors and microchips, could be subject to longer lead times, the CLC says.
There could also be future supply issues with:
Lighting and fire protection systems
Plastic drainage products
Sealants, coatings and paints
Kitchen white goods
Why is There a Building Materials Shortage?
The construction materials shortage can in part be traced back to increased building and home improvement activity in 2020, particularly during the first lockdown. This led to a slowdown in the production of materials from some factories in the EU, and supply chains have remained stretched ever since.
The cost of living, energy crisis and Ukraine war could threaten the industry's recovery, while other factors affecting shortages include:
Lack of lorry drivers
There is an estimated shortage of more than 850,000 HGV drivers in the UK.
Labour rates have skyrocketed in some areas, due to a combination of demand outstripping labour supply, and some trades putting up their rates due to being overwhelmed with work.
The FMB said in its last trade survey that 82% of builders have delayed jobs due to a lack of materials, while 60% have pressed pause on a job due to a lack of tradespeople.
Knock-on effects from Brexit remain, with roughly 60% of imported materials used in UK construction projects comes from the EU, according to the CLC.
Noble Francis from the Construction Products Association (CPA) says that the new immigration system which came into effect in January 2021 has made it harder to tempt EU workers back who left during the pandemic.
“The small builders and specialist contractors are likely to be the worst affected by this as they are the least likely to have the resources available."
There has been a global shortage of raw material shortages, stemming from global demand and other external factors (including the slowdown and in some instances, factory closures, outside the UK), which continues to constrain production of certain products, such as insulation, paints and adhesives, as well as packaging for products.
Source: Homebuilding & Renovating