CLC Latest: Construction Product Availability Statement

by Iain McIlwee | 22 Feb, 2023 | Material Shortages

Statement from John Newcomb, CEO of the Builders Merchants Federation and Peter Caplehorn, CEO of the Construction Products Association, co-chairs of the Construction Leadership Council’s Product Availability working group

The past month has seen yet more improvements in the balance of product demand and supply, with good availability for most construction products and prices no longer as volatile.

While demand has slowed in recent months, work in every major construction sector, apart from commercial, remains above pre-pandemic levels.

The slowdown has allowed brick manufacturers to rebuild stocks to their highest levels since May 2021. While there are some exceptions, manufacturers are reporting up to 8 weeks supply for most brick types at current demand levels.

The availability of gas boilers has also improved. With their supply chains returning to normal levels, availability increased by over 20% in January 2023 compared with January 2022.

Wholesalers in the electro-technical sector report their number one operational challenge is still “product availability and price issues” with longer lead times experienced for solar products including inverters, batteries and mounting systems.

In addition, the problems in the supply and pricing of EV chargers linked to regulatory changes, reported in detail in our January statement, remain a major concern. Installers should check the provenance with their wholesalers and request a Statement of Compliance and, if applicable, an Enforcement Undertaking.

Currently, there are large stocks of most grades of timber in the UK.  The exceptions being birch plywood and Siberian larch cladding, which come from Russia, but substitute products are available.

As reported last month, price inflation has largely stabilised with some suppliers deferring price increase as demand slows.  Gas prices appear to be easing and many larger energy intensive manufacturers have likely hedged a high proportion of their energy costs for the year ahead. Nonetheless, the impact on manufacturers from high energy costs often takes months to feed through to product prices – especially for energy-intensive products and materials – so the volatility from late 2022 may still be felt into the spring. Inflationary pressures on other costs, especially labour, continue and may well impact prices later in the year.

The Product Availability Group is monitoring potential impacts from the earthquake in Turkey that could disrupt supply chains.  While nothing major has been reported to date, Turkey is one of the world’s largest exporters of raw iron bars and Turkish ports are key connections for steel rebar and structural steel global trade. There may be longer term ramifications, for both materials and labour, when rebuilding begins.

To take part in the latest FIS Wage Rate and Productivity Survey, click here (results are only shared with participants)

For all the work FIS is doing around inflation and availability, including recommended contractual terms click here

CLC Construction Product Availability Statement

by Iain McIlwee | 24 Jan, 2023 | Material Shortages

The Construction Leadership Council issued the latest Product Availability Statement today:

The new year has started in much the same way as the last one finished, with product availability continuing to improve for almost all products and in all regions.  This is, in part, due to a reduced level of activity, with poor weather and a delayed return to sites after the Christmas break contributing to a slow start to 2023.

For some, there remains an ongoing problem in relation to gas boilers and M&E products, where the issue is the global supply chain for semi-conductors rather than the UK supply chain.

In some regions, bricks, blocks and roof tiles remain on allocation, but with manufacturers managing deliveries and builders’ merchants adjusting to the situation and carrying extra stock, the majority of end-users are not experiencing shortages. Brick stocks are also increasing, and a new plant will come on stream in 2024.

Price inflation has also stabilised.  Timber prices have continued to fall but are expected to increase in Q2 as European mills are reducing production over winter.  The price of some energy intensive products, such as bricks, cement and PIR insulation, increased by around 10% in January due to energy and distribution costs. However, with continuing economic uncertainty, some suppliers have deferred price increases, but with general inflation still above 10%, these are likely to be implemented by Q2.

The electro-technical sector is reporting delays for solar products (including inverters, batteries and mounting systems), and also the supply of EV chargers is an increasingly problematic area. Following regulatory changes in December 2022, manufacturers have updated their products or are granted an Enforcement Undertaking by the Office for Product Safety and Standards (OPSS) which allows them to continue to trade while they work towards product compliance. There is a fear that cheap imports which are not compliant with the latest regulations may reach the market.  Installers should check the provenance with their wholesalers and request a Statement of Compliance and, if applicable, an Enforcement Undertaking.

Shipping costs from the Far East have vastly improved, with container costs dropping nearly 80% from last year’s high now nearing pre-Covid levels. However, a surge in Covid in China is affecting all points of the supply chains there. These problems are expected to continue through the Chinese New Year, with most factories closing from 16-29 January.

Looking further ahead there is considerable uncertainty forecasting demand for the coming year particularly for domestic RMI work and increasingly for new housing, where higher mortgage rates and the end of the Help to Buy scheme at the end of March are expected to slow new sales.  Other areas, however, continue to see strong demand, particularly for industrial, commercial, infrastructure and government projects.

Statement from John Newcomb, CEO of the Builders Merchants Federation and Peter Caplehorn, CEO of the Construction Products Association, co-chairs of the Construction Leadership Council’s Product Availability working group

Commenting on the statement FIS CEO, Iain McIlwee stated:

“Whilst we are starting to see some hope on the horizon in terms of inflation abating, but we aren’t out of the woods yet.  In addition to the problems outlined above, the New Year started in our sector with a new and significant round of price rises for plasterboard and plaster.   We need to be careful and realistic in our pricing and continue to work with the supply chain to ensure that this is managed and we don’t just load it onto the specialists who simply cannot just absorb this.”

For all the work FIS is doing around inflation and availability, including recommended contractual terms click here

The government unveils new “Energy Bills Discount Scheme” for businesses

by Iain McIlwee | 10 Jan, 2023 | Material Shortages

The government announces the new “Energy Bills Discount Scheme” for UK businesses, charities, and the public sector from April.

• Scheme will provide a discount on high energy costs to give businesses certainty while limiting taxpayers’ exposure to volatile energy markets
• Businesses in sectors with particularly high levels of energy use and trade intensity will receive a higher level of support.

A new energy scheme for businesses, charities, and the public sector has been confirmed today (9th January), ahead of the current scheme ending in March. The new scheme will mean all eligible UK businesses and other non-domestic energy users will receive a discount on high energy bills until 31 March 2024.

This will help businesses locked into contracts signed before recent substantial falls in the wholesale price manage their costs and provide others with reassurance against the risk of prices rising again.

The government provided an unprecedented package of support for non-domestic users through this winter, worth £18 billion per the figures certified by the OBR at the Autumn Statement. This is equivalent to the cost of an increase of around three pence on people’s income tax.

The government has been clear that such levels of this support, unprecedented in its nature and huge scale, were time-limited and intended as a bridge to allow businesses to adapt. The latest data shows wholesale gas prices have now fallen to levels just before Putin’s invasion of Ukraine and have almost halved since the current scheme was announced.

The new scheme therefore strikes a balance between supporting businesses over the next 12 months and limiting taxpayer’s exposure to volatile energy markets, with a cap set at £5.5 billion. This provides long term certainty for businesses and reflects how the scale of the challenge has changed since September last year.

The Chancellor of the Exchequer, Jeremy Hunt, said:

My top priority is tackling the rising cost of living – something that both families and businesses are struggling with. That means taking difficult decisions to bring down inflation while giving as much support to families and business as we are able.

Wholesale energy prices are falling and have now gone back to levels just before Putin’s invasion of Ukraine. But to provide reassurance against the risk of prices rising again we are launching the new Energy Bills Discount Scheme, giving businesses the certainty they need to plan ahead.

Even though prices are falling, I am concerned this is not being passed on to businesses, so I’ve written to Ofgem asking for an update on whether further action is action is needed to make sure the market is working for businesses.

From 1 April 2023 to 31 March 2024, eligible non-domestic customers who have a contract with a licensed energy supplier will see a unit discount of up to £6.97/MWh automatically applied to their gas bill and a unit discount of up to £19.61/MWh applied to their electricity bill, except for those benefitting from lower energy prices.

A substantially higher level of support will be provided to businesses in sectors identified as being the most energy and trade intensive – predominately manufacturing industries. A long standing category associated with higher energy usage; these firms are often less able to pass through cost to their customers due to international competition. Businesses in scope will receive a gas and electricity bill discount based on a supported price which will be capped by a maximum unit discount of £40.0/MWh for gas and £89.1/MWh for electricity.

Energy Bill Discount Scheme summary

For eligible non-domestic customers who have a contract with a licensed energy supplier, the government is announcing the following support:

• From 1 April 2023 to 31 March 2024, all eligible non-domestic customers who have a contract with a licensed energy supplier will see a unit discount of up to £6.97/MWh automatically applied to their gas bill and a unit discount of up to £19.61/MWh applied to their electricity bill.
• This will be subject to a wholesale price threshold, set with reference to the support provided for domestic consumers, of £107/MWh for gas and £302/MWh for electricity. This means that businesses experiencing energy costs below this level will not receive support.
• Customers do not need to apply for their discount. As with the current scheme, suppliers will automatically apply reductions to the bills of all eligible non-domestic customers.

For eligible Energy and Trade Intensive Industries, the government is announcing:

• These businesses will receive a discount reflecting the difference between a price threshold and the relevant wholesale price.
• The price threshold for the scheme will be £99/MWh for gas and £185/MWh for electricity.
• This discount will only apply to 70% of energy volumes and will be subject to a ‘maximum discount’ of £40.0/MWh for gas and

Included in the list of energy intensive industries are:

• Manufacture of veneer sheets and wood-based panels
• Manufacture of assembled parquet floors
• Manufacture of plastics in primary forms
• Manufacture of builders’ ware of plastic
• Manufacture of lime and plaster
• Manufacture of plaster products for construction purposes
• Manufacture of tubes, pipes, hollow profiles and related fittings, of steel
• Cold rolling of narrow strip

  A full list of Energy Intensive Industries is available here.  If you feel your operations should be on this list and are not, please contact the FIS on iainmcilwee@thefis.org and will will pick this up with the relevant Government contacts.

Businesses in England will also benefit from support with their business rates bills worth £13.6 billion over the next five years, a UK-wide £2.4 billion fuel duty cut, a six month extension to the alcohol duty freeze and businesses with profits below £250,000 will be protected from the full corporation rate rise, with those making less than £50,000 – the vast majority of UK companies – not facing any corporation tax increase at all.

A full factsheet on what this means for business is available here.