Construction Product Availability: 23 November 2022
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
Product supply continues to improve, with the availability of building materials and products overall now at its best since pre-pandemic levels last seen at the end of 2019.
The restricted supply of semi-conductors, however, continues to challenge manufacturers of electro-technical products and gas boilers, though stock volumes are recovering. With current demand in the UK still outstripping supply, coupled with ongoing capacity and logistics issues in Asia, extended delivery times are likely to remain until the middle of 2023 and inflationary pressures will persist for these products.
There is a plentiful supply of timber in the UK and prices have reduced for popular groups such as CLS; however, log prices in Europe and North America are still strong and production is being reduced to reflect demand in the UK and Europe This could lead to gaps in the supply chain if demand rises suddenly but should not be a major issue if demand continues at current levels.
As mentioned in previous statements, birch plywood – currently a sanctioned good from Russia – is in short supply and some sectors will need to look at alternatives. Birch plywood can be legally sourced from Finland and Latvia but users should request full due diligence. Any imports of birch or birch furniture products from China and Vietnam will be manufactured from wood from Russia, which cannot be legally sold in the UK.
Inflationary pressures rather than availability present the main challenges for energy intensive products such as glass, concrete, cement, PIR, plasterboard and bricks. A warm autumn has helped reduce demand for gas but going into colder winter months prices may rise again. It is also unclear what financial relief from government will be available to energy intensive manufacturers in the spring when the current scheme is due to finish.
In his Autumn Statement, the Chancellor of the Exchequer announced a package of tax rises and spending cuts intended to stabilise the economy and lay the foundation for growth. Nonetheless, the near-term outlook will be challenging. While large-scale infrastructure projects will continue and larger housebuilders are currently maintaining volumes, we are already seeing a slight decline in starts by smaller housebuilders and a steady erosion of work in the home improvement sector as homebuyers and customers feel the pressure of rising living costs and interest rates.
We are also seeing a sustained, high level of construction firm insolvencies, particularly amongst SME builders and specialist contractors. This is in part the result of firms that became vulnerable during the pandemic now being wound up due to pandemic support being withdrawn. Other insolvencies are linked to economic uncertainty and the difficulty of reconciling fixed priced contracts with price inflation and reduced cash flow. Collaborative risk sharing will be key to preserving industry resilience and capacity moving forward.
For all the work FIS is doing around inflation and availability, including recommended contractual terms click here
