Across the UK, we are seeing continued rises in the cost of construction materials, which is contributing to a decrease in monthly construction output. Recent data from the Office for National Statistics state that output decreased 0.2% in May 2023, equating to £15,360 million.
So, what exactly is causing these price rises? Here we explore some of the factors that are contributing to the cost increases in the construction industry.
Rising inflation
According to the BBC, UK inflation sits at 7.9% in June 2023, with sharp price increases seen across various industries since 2021. They say that “soaring food and energy bills have helped drive inflation up”, and the war in Ukraine has seen less oil availability from Russia, “putting further pressure on prices”.
The rise of inflation has also been seen across the construction industry, as Construction News state that “the material price index for all construction work was 1.5 percent higher in May 2023 than May last year”.
Supply chain disruptions
As well as impacting inflation, the war in Ukraine has caused widespread supply chain disruption as the UK put a series of sanctions in place. This includes “the imports of iron, steel, silver and wood products along with high-end goods” from April 2022, according to The Office for National Statistics.
This has had a widespread impact on the construction industry, as the supply of goods and materials has been affected. This is likely to have impacted businesses that rely on timber supply, such as companies supplying fencing, timber cladding, or floorboards.
Increased demand
Increased demand for construction materials has also contributed to price rises across the industry. This is partly caused by a growth in urban population, as demand for housing and other infrastructure leads to demand for materials like bricks, cement, timber, steel, and so on.
There was also increased demand for construction materials during the Covid-19 pandemic, which slowed production of goods and supply chains. Shortages of materials caused by the pandemic led to increased demands for available products.
Climate change
Climate change is also impacting the price rises in construction, particularly in the timber industry. Extreme weather can have a huge impact on the supply of wood, as destructive events like wildfires can wipe out huge areas of forest.
Flooding and storms can also affect timber production, operations, and transport of goods – which can impact the price of materials.
With many factors affecting the cost of construction materials, including inflation, climate change, supply chains, and demand – it will be interesting to see how prices continue to change throughout 2023 and beyond.
