Construction’s “biggest risk” today comes from the impact of the Middle East conflict, the chief executives of the Builders Merchants Federation and the Construction Products Association have warned.
In a joint statement as co-chairs of the Construction Leadership Council’s (CLC) Material Supply Chain Group, John Newcomb and Peter Caplehorn said the challenges facing the UK construction industry “show no signs of easing”.
“Demand remains low, short- term availability remains stable, but the main risk comes from rising energy and fuel costs that are driving up prices,” they said.
The Middle East conflict has driven significant energy price spikes, with Brent crude oil surpassing $100 (£76) a barrel and wholesale gas rising by up to 75 to 93 per cent.
While most UK construction products come from domestic or European sources, imports of wall and floor tiles, exterior porcelain and sandstone from India have been disrupted by a gas shortage that halted production.
Available alternatives from the UK and Europe are likely to be more expensive, said the CLC.
Concrete plain roof tiles are expected to remain in short supply for the rest of the year. This is despite efforts by manufacturers to stabilise output by producing single colours for longer runs.
In addition, shipping costs for goods imported from East Asia have risen significantly as containers are rerouted around the Cape of Good Hope.
Price volatility has seen costs increase by 20 to 100 per cent.
“Clearly, price is unpredictable, and the workarounds are resulting in longer delivery times,” Newcomb and Caplehorn said.
Manufacturers, suppliers and distributors of construction products and materials are calling on the government to delay the removal of the fuel duty discount to avoid additional cost pressures on industry.
The temporary 5p-per-litre fuel duty discount, which has been in place since March 2022, is planned to be removed in a staggered approach starting in September 2026.
However, Newcomb and Caplehorn said the “main challenge” is the quick increase in energy prices and its immediate impact on material costs.
“At the start of the supply chain, many of these manufacturers are facing significant cost increases, although some will be protected by energy price hedges in the medium term,” they said.
“Many manufacturers recognise the industry’s challenges, adopting a measured approach, providing clear explanations and reasonable lead times when passing on additional costs.”
Steel prices are changing so quickly that some companies are struggling to obtain reliable quotes, they added.
Merchants, housebuilders and contractors expressed concerns to the CLC about any rapid imposition of surcharges with limited supporting evidence and insufficient notice of cost increases.
“As costs are passed along the supply chain, profit margins will be squeezed at every level,” Newcomb and Caplehorn added.
“Such pressure then increases the contracting tiers of the supply chain, with SMEs being particularly vulnerable. The stability of supply-chain finances is, therefore, fast becoming an urgent issue that this group is monitoring.”
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Cristina Lago