Consultant says materials costs have gone up 15% this year alone
More warnings that materials and labour shortages threaten to choke off the sector’s post-pandemic recovery have been issued with Arcadis saying the problems now threaten to delay ongoing jobs and push start dates back for those yet to get going.
Earlier this week, the latest PMI index showed that output had stalled in August with materials shortages and a lack of lorry drivers being blamed for the second successive month of slowing numbers.
In its Summer market view, Arcadis said materials costs have risen by an average of 15% this year alone – compared to a long-term trend of 3%.
It added the problems meant the cost of jobs would inevitably head north and Simon Rawlinson, head of strategic research and insight at the consultant, said: “The challenges currently being experienced by construction are a clear indicator of the extent to which the market has been a victim of its own success.”
And he warned clients would soon have to get used to hearing their jobs were going to be late because of hard-to-find materials and labour.
He said: “We’ve seen an uptick of almost 20% in levels of activity since the last quarter, but now, thanks to increases in material prices and availability issues, there is a very real risk of project delays, both on-site and in procurement.”
Arcadis said a surge in firms’ order books, which increased by 10.7% in the quarter to reach £18.3bn, surpassing pre-pandemic peaks, would also put pressure on firms’ ability to finish off existing jobs as those down the line began to demand more attention.
But he added bulging order books had taken away some of the pressures heaped on contractors to win work in the short term.
It still said tender prices for building work would rise 3% this year but would ease in 2023.
Rawlinson added: “The situation is unlikely to stabilise before 2022, and so the industry needs to find a way to manage these price increases and mitigate any potential negative consequences.
“There is no silver bullet, but more transparency and a more equitable sharing of risk will both be crucial when it comes to avoiding unnecessary project delays and cancellations.”
Arcadis added that infrastructure remained susceptible to pressures around materials availability, upgrading its forecast to 4% for 2021. It held its previous forecast of 5% for 2022 onwards.