CLC highlights construction volatility
31 March 2022
In its update on product availability during March, the Construction Leadership Council (CLC) highlights the volatility of material prices, fluctuations in demand and ongoing supply chain uncertainty.
John Newcomb, CEO of the Builders Merchants Federation and Peter Caplehorn, CEO of the Construction Products Association, who are co-chairs of the CLC’s Product Availability working group, say that although the overall supply situation has not changed substantially, there has been a temporary easing this month, most likely due to the holiday period and homeowners cancelling projects due to higher costs or cost uncertainty.
While current demand remains strong there are the first signs of a slight softening and shift in the balance of demand, with some regions reporting a decline in the level of retail sales for DIY and home improvement projects, but compensated by higher volumes of trade sales, the report states.
The supply picture remains stable in terms of full production with good stocks and availability of most products. However, supply challenges continue to affect bricks, aircrete blocks, roof tiles, gas boilers, plastic drainage and other plastic products dependent on polymers, and some electrical products particularly those using semi-conductors.
The CLC states that price inflation remains the major concern. There are reports that some suppliers are only willing to hold quotes for tender prices for 24 hours. The resulting uncertainty is leading some contractors to pause before entering fixed-price or long-term contracts.
The volatility of energy prices is also having an impact. Some manufacturers of energy-intensive products are now warning of surcharges linked to rising costs.
This issue is not limited to the UK, says the CLC; the cost of energy is impacting manufacturers across Europe, with reports of cement plants in Spain closing due to the latest increases. However, UK manufacturers are managing stocks and the supply chain to enable continued supply, it adds.
UK brick and block stocks have also increased slightly during the quieter winter months but as the market accelerates in the spring it will be essential for builders to plan ahead and work with manufacturers to ensure timelines of availability.
Paints and coatings continue to be affected by ongoing raw material shortages recently exacerbated by further coronavirus lockdowns in China and by the war in Ukraine. This is likely to affect prices, and possibly the availability of some products over the coming months.
Other product areas that may be affected by the Russian invasion include ceramic tiles and sanitary ware, as Ukraine is a main source of supply for the kaolin used in their manufacture.
What might such factors mean for hire companies?
The possibility of contract delays and uncertainty of start dates due to pricing volatility further highlights the necessity of hirers to keep in close contact with contractors to ensure they can react when the go-ahead is given.
In addition, the inflationary climate means that businesses must monitor their costs, overheads and hire rates carefully.
And if there’s a longer term decline in the level of DIY and home improvement projects, that could spell the end to the boom in activity that started during the first lockdown when people were furloughed.
Nevertheless, the strong trade sales suggest that people are still prepared to outsource such work – a case of ‘do it for me’ rather than DIY. And house building has remained resilient since the start of the year. So hirers will need to steer towards those markets that offer the best opportunities.
As has been said before, the current economic climate calls for nimble, agile and effective management.
