Inflation and contractor failure continue to dog industry, consultant adds

The latest market survey from Gleeds has said more than half of the respondents expect raw material prices to rise due to supply risks resulting from the conflict in Gaza and the ongoing war in Ukraine.

Global tensions are now considered to be one of the biggest threats to the construction industry in the UK, behind interest rates, inflation and flagging investor confidence.

Over 80% of all those quizzed for its Q1 report said that high inflation was heavily impacting the viability of schemes, with 88% of contractors claiming that either they or their supply chain had declined a tender due to an untenable risk profile or lack of capacity over the preceding quarter.

red sea

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Ships are having to be rerouted around southern Africa because of the attacks in the Red Sea in the wake of the ongoing conflict in Gaza

Pressure is mounting as Houthi activity in the Red Sea, increased shipping costs and delays arising from reroutes around the Cape of Good Hope have led some Asian steelmakers to withdraw from the European market.

>> See also: Red Sea crisis: how worried does construction really need to be?

>> See also: Familiar woes to blame as £400m turnover Essex contractor set to sink into administration

The consultancy’s report also found that 54% of contractors questioned had been involved with projects impacted by insolvency in the past three months.

Gleeds chief executive Graham Harle admitted: “These are trying times. Global instability continues to add fuel to the fire of uncertainty in the UK construction sector. Our report shows that projects are being negatively impacted by an increasing number of insolvencies.”

Just 12% of those questioned said last November’s Autumn Statement had increased their confidence in the government’s ability to grow the economy, the report added.