But mild winter sees higher than average levels of construction
Contractors plagued by price inflation can expect further cost rises as a result of Russia’s invasion of Ukraine, the Construction Leadership Council (CLC) has said.
The group said manufacturers had increased prices by between five and 10% so far this year, with the cost of the most energy-intensive products rising by as much as 20%.
Raw materials shortages, along with rising energy, freight and labour costs, were identified as the root cause of higher prices – and the group said even greater volatility could result from the ongoing conflict in Ukraine, particularly for energy-intensive products and those dependent on semiconductors.
The warning came in a joint statement from Builders Merchants Federation chief executive John Newcomb and Construction Products Association chief executive Peter Caplehorn, who are co-chairs of the CLC’s product availability working group.
The pair said that while sanctions on Russia and Belarus in response to the former’s invasion of Ukraine would have “enormous implications” for global trade, the war’s effect on building supply in the UK was unclear.
While Russia, Ukraine and Belarus accounted for just 1.25% of building products imported into the UK last year, Newcomb and Caplehorn warned some product components could be exposed to inflation through raw materials price increases such as aluminium, copper, bitumen and pig-iron and iron ore used in the manufacture of steel.
They warned of the potential impact on supplies of neon gas, which is a key input for semi-conductor production and is sourced in large quantities from Ukraine and Russia.
Chip manufacturers hold a two-to-four-weeks’ additional inventory of neon, according to the CLC, which warned alternative sources would require long term investment before being able to supply the global market.
Energy-intensive products are also likely to be hit hard by sanctions – despite the UK importing just 4% of its gas from Russia – with prices following the European market.
Newcomb and Caplehorn also noted that sanctions against people with links to Vladimir Putin’s regime and firms with Russian ownership could hit the UK supply chain.
More positively, the CLC’s update reported that the mild winter helped maintain higher than average levels of construction for the first months of the year and they said availability of most products was good.
However, previously reported supply challenges continue to affect a variety of products, including bricks, aircrete blocks, roof tiles, steel lintels, cable trays and trunking, as well as manhole covers, gas boilers and some electrical products – particularly those using semi-conductors and microchips.
The group expects these shortages to persist until the spring if strong demand is maintained.
Meanwhile, the pair said labour shortages in the industry show “few signs of abating” but had better news with regards to road haulage, where they said government action had lessened the shortage of HGV drivers.
Transport delays continue and costs remain elevated for products produced in China and south-east Asia, they reported, with shipping rates still eight to nine times higher than before the pandemic.
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