The co-chairs of the Construction Leadership Council’s Product Availability working group — BMF CEO John Newcomb and Peter Caplehorn, CEO of the Construction Products Association — have issued their latest statement.
A mild winter has helped to maintain higher than average levels of construction during the first two months of the year, with strong sales in all product categories. There are good stocks and availability of most products but as reported in the statement issued on 18 January, supply challenges continue to affect bricks, aircrete blocks, roof tiles, steel lintels, cable trays and trunking, manhole covers, gas boilers and some electrical products, particularly those using semi-conductors.
If strong demand and consumer sentiment continues, these shortages and extended lead times are likely to persist to some degree at least into the spring.
Price inflation, largely caused by a shortage of raw materials, rising energy, freight and labour costs, is of greater concern than availability. Price increases of 5-10% have been announced by many manufacturers so far this year, and energy-intensive products have increased by as much as 20%. Such inflation is proving a root cause of serious difficulties for contractors.
“Price inflation, largely caused by a shortage of raw materials, rising energy, freight and labour costs, is of greater concern than availability.”
Other ongoing issues include labour shortages, which are impacting all corners of the industry and show few signs of abating. Road haulage, however, has improved slightly as Government has worked with industry to lessen the shortage of HGV drivers. For products produced in China and South East Asia, transport delays continue and costs remain elevated, with shipping rates still eight to nine times higher than pre-Covid levels and air cargo rates seven times higher.
The imposition of sanctions on Russia (and Belarus) in response to the invasion of Ukraine will likely have enormous implications and an impact on global trade for years to come, though the effect of the war on building materials supply in the UK is still to be determined. The region — including Russia, Ukraine and Belarus — accounted for only 1.25% of building products imported into the UK last year, however there are likely to be higher levels of direct and indirect exposure to some product components either through raw materials such as aluminium, copper, bitumen, and pig iron and iron ore used in the manufacture of steel, or through higher prices in more exposed European markets.
Sanctions against individuals with links to the regime in Russia and firms with Russian ownership may also affect the UK supply chain, whilst individual firms and other organisations are already taking steps that will have implications — for example, The European Federation of Building Material Distributors (UFEMAT) has called on members to place an embargo on importing all Russian building materials until the war in Ukraine comes to an end.
Among a number of other supply chain risks (Russia supplies one fifth of the world’s nickel exports, used in the production of lithium-ion batteries, for example), Russia is also a major supplier of crude oil and gas. While the UK imports just 4% of gas from Russia, UK prices follow the European market and have doubled since the start of the year. Should sanctions be applied to energy products, replacing Russian gas globally will lead to even greater price volatility for energy intensive products.
The Construction Leadership Council will be liaising with government to identify areas impacted by sanctions and the knock-on effect to UK construction.
