Group pinpoints series of impacts conflict is having, adding ‘cost of steel is biggest concern’
The war in the Middle East is now the biggest threat to UK construction, the Construction Leadership Council’s material supply chain group has warned.
An update published today by John Newcomb, chief executive of the Builders Merchants Federation and Peter Caplehorn, chief executive of the Construction Products Association, co-chairs of the CLC’s materials group, said: “The biggest risk today stems from the impact of the Middle East conflict.”
It added: “Most construction products used in the UK are produced either domestically or in Europe, and relatively few are at risk of availability issues directly linked to the conflict.
“However, imports of wall and floor tiles, along with exterior porcelain and sandstone from India, have been disrupted by a halt in production caused by a gas shortage there. UK and European alternatives are available but these are likely to be more expensive.
“Shipping costs for goods imported from the Far East have risen significantly as containers are rerouted around the Cape [of Good Hope]. Price volatility has seen costs increase by 20% to 100%, or even more in one case. Clearly, price is unpredictable, and the workarounds are resulting in longer delivery times.
“The manufacturers, suppliers and distributors of construction products and materials are by far the largest users of the road and rail networks, and there is clear evidence that they are feeling the impact at the pump. The Middle East conflict has caused a surge in petrol and diesel prices (recently 10% and 20% as of w/e 27 March) that has yet to stabilise and will likely persist for some time, even if hostilities are quickly halted.”
But it said the main challenge “is the rapid rise in energy prices and their immediate impact on material costs, particularly for products with energy-intensive manufacturing processes or derived from oil-based raw materials”.
It warned: “Steel is now the biggest concern: prices are changing so rapidly that some companies are struggling to obtain reliable quotes.”
It said margins across the industry are set be eroded with firms having to absorb higher costs. “As costs are passed along the supply chain, profit margins will be squeezed at every level. Such pressure then increases the contracting tiers of the supply chain, with SMEs being particularly vulnerable. The stability of supply-chain finances is, therefore, fast becoming an urgent issue that this Group is monitoring.”
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