It has been widely covered in the consumer and trade press about the effects that Covid-19 has had on the construction industry, in particular the material shortages and prices increases.
According to the Department for Business, Energy and Industrial Strategy (BEIS), the construction materials shortage and price hikes saw the cost of building materials surge a whopping 23% in August compared to one year ago. And with shortages across the board with timber, cement, steel and paint being just a few of the key materials that are in short supply, the industry is facing quite the challenge!
Here at WJL, we recently conducted a supplier survey to get other businesses thoughts on this issue:
- Half of the people surveyed said they began seeing prices rise Q3 and Q4 of 2020, with 63% classing it as a dramatic rise in cost.
- Over 60% of people also believe that many price rises aren’t slowing down, with one participant noting that European Oak prices are still on the way up, however, softwood price rises are starting to slow down.
- One participant of the survey said he saw Oak increase by 80% in one hit!
50% of people surveyed are willingly optimistic and expect prices to plateau/ decrease in the next 6 months, however, 25% said they can’t envisage them decreasing any time soon.
- Across the board, participants pointed issues to delays caused by Covid, staff shortages, lack of HGV drivers and Brexit as main causes of the current issues.
How can contracts cope with supply and cost uncertainty around material shortages?
WJL recently spoke to Raja Flora, Partner at Edge Consult who specialise in construction disputes, adjudications and contracts about what construction companies can do to protect themselves better during the materials shortage.
Raja comments: “Procurement for developers is likely to change if the best value is to be achieved, one can either put the risk all on the contractor or have a procurement process that allows the profit margins to be set and the fluctuating prices shared. Therefore, my advice would be to plan ahead, plan ahead and plan ahead. It may sound obvious but construction companies need to review their project pipeline and monitor it constantly to try and foresee any obstacles that they may face. It is widely known what materials are in short supply, so if you have a project coming up, start ordering what you can now! This not only helps you have the physical material ready for when you need it but also prices are rising weekly and it will help safeguard your profit margins. In addition, if the pandemic is the cause of excessive price rises, some contracts may already have a mechanism for re-valuing such events in the spirit of mutual trust and cooperation.
As always, we would also suggest reviewing any new contracts very carefully. What happens if you find yourself unable to complete a project on time due to material shortages? Are you liable if the project overruns? Whilst no one has a crystal ball for any project, just spending the time to review and plan will certainly help further down the line.”
As we head towards the end of another year, we are all hoping that 2022 will see fewer challenges than we’ve faced over the last 18 months.
Jamie Lovatt, WJL’s Managing Director adds: “It has been tough; pricing up jobs, juggling supplies, materials and staff when everything seems to be changing almost daily. However, I think a lot of businesses expected this as a knock-on from Covid. Maybe not to the level that it’s reached but very early on into the pandemic we knew price rises were going to hit us at some time. Thankfully, due to the strength of our relationships with customers and supply chain, we have been able to navigate our way through. Here’s hoping the industry can settle for the coming year ahead.”
To get in touch with a member of our team about your next joinery project, please contact us.