Improving Product Availability Amid 23% Inflation This Year

Construction Materials

IN THE LATEST statement from the Construction Leadership Council’s Product Availability working group, general product availability is said to be improving.

Some products, including bricks, aircrete blocks, some roof tiles and semi-conductors, which are extensively used in building services products and gas boilers, remain on allocation or subject to longer lead times. Otherwise, manufacturers are mostly keeping up with demand and the market has become adept at managing supply with planned delivery times.

Generally, demand is expected to remain positive into the second half of 2022, though some sectors such as private housing RM&I appear to be coming off their highest levels for certain products. Market participants suggest that a slight slowdown in demand may allow stocks to be rebuilt and improve availability.

Average inflation for products and materials so far this year has been around 23%; with more significant price increases in energy intensive products such as insulation, cement, concrete and many steel products. Further price increases for those products are anticipated in the second half of the year owing to rising energy prices and input costs, and some have already been passed on to customers.

Contract Risks

The Statement says that concerns have arisen that volatile inflation has led to the failure of relevant data indices to reflect market reality. Some contractors are engaging in dialogue to use prime cost, provisional sums and target price-based contract mechanisms to mitigate the risks.

Timber prices have largely stabilised from the highs of last summer due to easing demand and strong UK stocks of structural timber making supplies readily available for contractors and merchants. The price of structural timber in Europe and America remains firm to strong and, as a consequence, UK imports of structural timber are reducing. Some panel products have even seen reductions since the first quarter, but structural plywood prices remain firm. Birch plywood and it potential substitutes have seen little or no availability due to Russian sanctions causing significant upwards price pressure for these products.

Labour Shortages and Wages

Recruitment, retention and related wage inflation continue to present serious concerns across UK construction and may supplant product availability issues in 2023 among the key risks facing the industry. For example, there is clear evidence from the Product Availability Group’s participants that skills shortages are making some SME builders reluctant to take on projects, as they don’t have the trades to complete the work.

Earlier in June, the UK Government made an important announcement regarding the transition to the UK marking ahead of the ending of recognition of CE marking on 31 December 2022. The change will allow manufacturers with existing type tests from EU notified bodies under AVCP System 3, where the product was tested by 31 December 2022, to affix the UK mark to their products, and to continue to supply them to the GB market without needing to be retested. Further government guidance is here.

The announcement has been welcomed by industry, as it will help some manufacturers continue to place their products on the UK market in 2023. That said, there are many questions and risks still outstanding and industry is awaiting further details from Government. The Construction Leadership Council is studying the announcement and guidance closely, with the aim of highlighting any outstanding areas of concern and the potential impact on product availability.

The Construction Product Availability Statement is from John Newcomb, CEO of the Builders Merchants Federation and Peter Caplehorn, CEO of the Construction Products Association, co-chairs of the Construction Leadership Council’s Product Availability working group.

 

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