Soaring cost of construction materials could impact home building

Builders have warned a steep surge in the cost of materials could threaten housing supply.

The material price index for all work shows the prices paid for construction materials was up by almost a quarter in the year leading up to March 2022, according to figures published by the Department for Business, Energy and Industrial Strategy (BEIS).

There are a number of factors behind the surge with the general rise of prices through inflation as well as global shortages of materials and increased demand. Brexit and the impact of the conflict between Russia and Ukraine – where 13 per cent of the UK’s steel imports are sourced – have also caused price spikes.

Brian Berry, chief executive of the Federation of Master Builders (FMB), told The Big Issue the “figures are unwelcome but expected news for builders” following a survey from the group that found 83 per cent of local builders had been forced to put up their prices to cover rising costs.

“The cost of building materials has been extremely volatile over the last year, squeezing the bottom lines of small builders,” said Berry.

“Unfortunately, this isn’t a simple issue to fix and will require some pragmatic thinking from the government to ensure consumers keep commissioning projects, especially greening their homes. This will ensure that local builders stay in business as we move further into the year.”

While the latest statistics show a surge in the last year, prices have been rising significantly since the pandemic began as Covid halted the construction industry and delayed projects. 

Prices were 35 per cent higher across the board in March 2022 when compared to January 2020 and experts in the field expect prices to continue to rise in the months ahead.

Not all products have affected equally. The BEIS figures show a 63 per cent spike in sourcing concrete reinforcing bars (steel) while fabricated structural steel was up 54 per cent whereas pre-cast concrete prices experienced smaller rises at 26 per cent.

Overall, the UK imports more construction materials than it exports and this is where Brexit has had an impact – imports increased by 26 per cent in the whole of 2021 compared to 2020.

Meanwhile, there are a number of regulation changes that have been introduced by central government in relation to decarbonisation and ventilation to help the UK reach its 2050 net-zero targets that are also increasing costs.

A spokesperson for the Home Builders’ Federation told The Big Issue: “I think there are a range of issues, all out of builders’ hands that are driving up prices; inflation, global shortages of some materials, increased demand, Brexit etc.

“Builders are working with the supply chains to mitigate them as far as possible but clearly it is proving a significant challenge for industry both in terms of actually sourcing materials on time, but also the cost of them. Builders can’t simply pass on costs to new home buyers as the market won’t support that.

“Higher material prices also come as the industry faces a range of other new and increasing regulatory costs being levied upon it by local and central government which in total are threatening development viability and so housing supply.”

The difficulties facing the construction sector come at a time when the housing crisis is continuing to bite in the UK.

House prices are continuing to surge in the face of huge demand for properties while Boris Johnson is reportedly considering extending the Right to Buy scheme to housing association tenants to help more people buy their home.

The prime minister’s move attracted criticism from housing charity Shelter, which said the “hare-brained idea” was the opposite of what the country needed right now and called for more affordable homes to be built instead.

The rising costs for builders suggest the housing crisis is here to stay for some time yet. 

The Construction Products Association (CPA) warned of slower growth in construction output in the months ahead as global issues started to affect the UK market, revising a 4.3 per cent forecast made three months ago down to 2.8 per cent.

Noble Francis, CPA Economics Director, said:  “The major challenge is creeping uncertainty. The immediate picture is one of resilient demand and healthy pipelines.

“Longer term, the current inflationary pressures, if sustained, will have an increasingly depressing impact, while the continuation, or potential escalation, of conflict in Europe presents an existential risk.”