Inflation remains ‘number one issue’ for firms, says CLC

Price increases remain “the number one issue” for the contractors despite softening inflation, the Construction Leadership Council has said. 

In its latest product availability statement, the group reported that reductions in the prices of structural steel and rebar in the first quarter of the year and said that timber prices had returned to pre-covid levels. 

According to the latest figures released by the Department for Business and Trade, the material price index for construction work increased by 10.6% in February compared with the same month in 2022. 

“While prices are not rising as quickly as they have been, they are still substantially higher than 18 months ago and profit margins are being squeezed,” said working group co-chairs John Newcomb and Peter Caplehorn. 

They were particularly concerned for SME builders and regional housebuilders and noted “isolated reports” of credit risk insurance being withdrawn. 

The CLC report also noted that, despite falling wholesale gas prices, the cost of energy intensive products such as bricks would be unlikely to drop for some time as manufactured hedged their gas prices last autumn. 

Despite their warning on inflation, Caplehorn and Newcomb said there was good availability for most building products, with long-standing issues such as bricks, blocks and boilers having dissipated.  

>> Small project starts plummet as inflation fears resurface 

This will be welcome news for construction firms dealing with Q1 demand higher than that which had been predicted at the end of last year. 

The pair said the “fairly upbeat” picture had been helped by a better-than-expected forecast from the Office for Budget Responsibility, which predicted the UK to avoid recession and for inflation to fall to 3% over the course of the year. 

Plasterboard was among the exceptions to the positive supply picture. The product is currently on allocation and measures have been introduced to increase capacity. 

The electrotechnical continues to experience delays in the delivery of products including solar PV equipment and LED lighting due to lack of semi-conductor supply.