Construction Material Prices Risen by 27% in Past Year

THE LATEST FIGURES for construction material prices show an overall increase of 27.2% in May 2022 compared to the same month the previous year in the all work category.

Breaking the increase down, the year-on-year change to May 2022 saw a rise of 23% in the material prices in the new housing sector; 25.5% in the repair and maintenance sector and 30.1% in the other category, according to the Department for Business, Energy & Industrial Strategy (BEIS) construction material price index.

The monthly change in construction material prices was an increase of 3.7% overall between April and May 2022 in the all work category. This was made up of a monthly rise in new housing building material costs of 2.5%, 2.5% in repair and maintenance and 4.4% in the other work category.

Construction Material Prices Worse Affected

The Office for National Statistics figures last week showed 62.4% of construction firms reported the price of goods and services bought in May 2022 had increased compared to the previous calendar month. This is the context of an all-industry average of 48.5%.

These increases are inevitably being passed on to customers, with 51.3% of construction firms reporting that raw material prices were a factor causing them to consider raising prices in July 2022. Likewise, 36.0% of construction firms reported energy prices as a factor.

These price rises through the supply chain are evidently more severe in construction, as they are set against an all-industry average of 28.7% of businesses reporting raw material prices and 41.5% reporting energy prices as factors causing them to consider raising prices.

Meanwhile, only 13.4% of construction firms reported that their business’s overall performance had increased in May 2022 compared to the previous year. Most businesses (58.1%) reported their performance stayed the same while 11.8% reported that their performance decreased. The corresponding all-industry averages were 17.4% of all businesses reporting increased performance, 53.0% reporting no change and 17.2%reporting decreased performance.

Business Conditions

In its most recent update on business conditions on 16 June, the Bank of England reported construction output growth weakened modestly as rising materials costs and labour shortages caused projects to be delayed or cancelled. These were most commonly reported for commercial projects. Contacts said housebuilding activity was also held back by planning delays.

By contrast, construction of public and private infrastructure, and health and education projects had been less affected. Demand for the construction or refurbishment of office space also remained robust, supported by demand for premises that meet environmental requirements and are suitable for hybrid working. Construction of warehousing and data centres also remained strong.

The pipeline of construction projects is expected to slow as cost increases result in more projects being put on hold. Rising costs and squeezed household budgets are expected to weigh on demand for new homes and home improvements this year and next.

However the Construction Products Association’s most recent forecast is for industry growth of 2.8% in 2022, slowing to 2.2% next year and 2.9% in 2024.

>>Read more on construction output data and prices in the news