UK recovery uncertain if ‘perfect construction storm’ persists, economists warn Business News

Builders are being forced to lower tools amid a “perfect construction storm” that casts doubt on the UK’s economic recovery, industry groups have warned.

The cost of building materials has soared 20%, exacerbating the problems facing an industry worth around £ 117bn to the UK economy.

Labor shortages and delivery delays in the UK, coupled with a global supply shortage and new Brexit red tape, are already crippling construction projects across the UK and fueling rising prices.

Besides the rising cost of supplies, bottlenecks in global shipping and the shortage of truck drivers are forcing many small construction companies, which make up around 90% of the sector (according to industry estimates) , to suspend their projects.

The cost of building materials rose 20% year-on-year in July, according to figures released Wednesday by the commercial department, and seen by The independent. Evidence gathered by the Bank of England in the three months leading up to June suggests that supply shortages and labor constraints were starting to dampen the sector’s recovery.

Homebuilder Berkeley on Friday became the latest construction company to warn investors of the impact of inflationary pressures on the cost of building materials.

He warned of “lingering supply chain and labor market problems resulting from Brexit and the pandemic”, and said that despite strong home sales, “the operating environment remains challenging” for the construction industry.

Construction accounts for around 6% of the UK’s economic output, and significant delays in projects could have a “spillover effect on the recovery if construction companies do not complete projects quickly,” said Andrew Goodwin , UK Chief Economist at Oxford Economics. , a consulting firm. This is not yet enough to significantly reduce total GDP growth, but if these delays persist, the problem may get worse.

“If people stop doing construction because they know they will face delays, it will start to have a real effect on the economy at large,” Goodwin said. Indeed, it could undermine confidence and discourage people from spending their savings – which have accumulated during closures triggered by the pandemic – to improve their homes.

Yet despite the risk of a slowdown on growth, demands from the Federation of Contractors and other industry groups to alleviate the shortage of truck drivers by issuing temporary visas to drivers in the EU have was rejected by the business secretary last week.

The logistics industry, already facing challenges from Brexit, faced further disruption during the pandemic due to issues with sea and road freight, which contributed to increased costs for businesses. Managing supplies is especially difficult for small construction companies, which have to rely on daily inventory from materials dealers, while large construction companies are able to stock.

Still, the business department is failing in some practical steps to help solve the problems, according to government officials and people familiar with the discussions in the business department’s building board, which includes an array of issues. construction industry organizations. An industry insider familiar with the group said he believes the government does not see the “perfect construction storm” that is currently underway.

While some issues, such as global shortages of certain commodities, are beyond the government’s control, there are immediate changes the government could use to ease pressure on the sector, for example by tweaking the immigration system, said. the initiate.

Brian Berry, General Manager, Federation of Builders (FMB), said: “In an age of builders’ workloads increasing, the impact of material price increases cannot be overstated.

“The latest FMB member survey shows that 98 percent of small builders are seeing prices go up, and they expect that to continue until the fall.

“This is why it is so important that a fair share of materials get to local traders, and why the FMB has supported calls to put heavy truck drivers on the shortage list in order to reduce costs. delivery delays, ”said Berry. He added that builders need to rely on the understanding of a head of household when working deadlines are stretched.

The construction crisis comes amid government pledges to ‘build back better’ and continue efforts to improve the energy efficiency of UK homes in order to achieve its climate ambitions.

If the government’s plans come to fruition, investment in infrastructure will be at its highest sustained level since the 1970s, according to Jonathan Portes, professor of economics at Kings College London. The government is taking advantage of low interest rates to borrow to make “core” investments in long-term infrastructure projects, he said.

“But invest …

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This notice was published: 2021-09-05 18:37:37

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