Energy crisis will increase material prices further, amidst slowing construction output

Energy crisis set to drive material price increases, as construction output slows

Move over, steel and timber: it looks like it’s the turn of bricks, cement and concrete to experience severe price rises in the near future, according to Maurice van Sante, Senior Economist at ING Research.

The ongoing energy crisis is set to have a knock-on effect on energy-intensive building material processes, says van Sante, especially considering that gas can account for one-third of the cost of a brick factory.

Van Sante: “Despite the slower pass-through of procurement prices (including gas prices) for concrete, cement and bricks, the boom in gas prices will eventually make its way through these markets, which are very energy intensive. Therefore, contractors will have to prepare themselves for a phase of rising prices for building materials. The only ‘positive’ thing for them is that the increase will probably be slower compared to plastics and timber.”

The bad news continues: construction output fell by 0.2% in August, according to the Office for National Statistics, following the trend of steady decline in construction output since April 2021. The level of output stands at £14.24m, 1.5% lower than pre-pandemic (February 2020) levels.

Meanwhile, the author of Modernise or Die warned this week that hopes of the Government easing restrictions on overseas workers to help ongoing labour shortages are unlikely to be realised. Mark Farmer, whose report was published five years ago, predicts that the industry will face “some pain ahead” as a result, with labour shortages overtaking material issues as the industry’s chief concern.

Barratts sees strong start to the new financial year, and DLUHC announces £58m funding

Barratts reported a positive start to the new financial year this week, showing strong trading levels despite a slowing down in completions and reservations.

The country’s largest housebuilder delivered 3,699 homes in the period from 1 July to 10 October, 8.3% lower than the same period in FY2021, but said that it remained on track to complete between 17,000 and 17,250 homes in this financial year.

In the meantime, the newly-named Department for Levelling Up, Housing and Communities announced a £58m allocation from its £75m Brownfield Land Release Fund. The fund, which will go to 53 councils, is expected to yield an extra 5,600 homes and 17,000 jobs, DLUHC said.

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