Rising Prices Continue to Squeeze UK Construction Supply Chain

The challenges facing the UK construction supply chain persist as the Middle East conflict continues to drive up prices despite little growth in product demand.

In its latest statement, the Construction Leadership Council’s Material Supply Chain Group said that despite good product availability, with only concrete plain roof tiles in short supply, the impact of cost inflation on building materials has already been substantial.

Rising Prices

Builders’ merchants reported that standard January price increases added 2.2% to the cost of goods, and the annualised impact of Middle East related increases to date has added a further 2.9%, taking the total increase to around 5.1%.

Fuel and energy costs continue to be the most immediate and pronounced impact, affecting all suppliers through both direct transport and wider operational expenses. While many businesses are currently absorbing these costs, the Group says this is not sustainable indefinitely, and there are already reports of domestic haulage fuel surcharges of 5% to 10%.

The Group says there is no product category that has not shown signs of either current or forthcoming price increases, with pressure recently extending into bathrooms and kitchens, driven respectively by MDF costs for cabinetry and rising overseas logistics and global input costs.

Increases in raw material costs for metals, including steel, brass, tungsten and copper, were already evident before the Middle East conflict. Still, further increases are expected, as some imported steel products are facing severe UK tariffs and quotas from 1 July.

For SMEs and housebuilders, a fundamental issue remains the consumer’s capacity to absorb price increases, particularly with the withdrawal of a large number of mortgage products. Higher costs are reportedly leading to greater caution and growing uncertainty over whether RMI projects and house purchases will be delayed or cancelled.

Call for Price Transparency

In response to these price pressures, the Group called for notifications of price increases to be accompanied by “a clear, detailed explanation” to pass through the market.

It said, “One of the key challenges across the supply chain remains the lack of detailed explanation accompanying price increases, making it difficult to justify and communicate these costs to clients.

“Clearer evidence and transparency would be welcomed, even if the increases themselves are not.”

The Group added, “While there is acceptance that price pressure is justified in some areas, particularly for energy-intensive products (e.g. steel, bricks, concrete, glass, insulation) and petrochemicals (e.g. adhesives, bitumen, PIR, and PVC pipe), increases in other product categories are considered difficult to attribute solely to underlying costs.

“As costs are passed along the supply chain, profit margins are being squeezed at every level. We know, for example, that cost pressures are severely affecting roofing and other specialist subcontractors, who are trying to balance escalating material costs within existing 6-12 month fixed-price agreements, highlighting a significant pressure point within the supply chain.”

The Material Supply Chain Group statement is from co-chairs John Newcomb, CEO of the Builders Merchants Federation, and Peter Caplehorn, CEO of the Construction Products Association.