Business

Materials shortages causing major pain for construction sector

Gary McDonald Business Editor

THE Covid pandemic, Brexit and burgeoning demand are all combining to drive up prices for the essential materials the north’s construction sector desperately needs, according to an industry body.

Virtually every respondent (98 per cent) to the Construction Employers Federation's (CEF) latest state of trade survey reported material shortages, whether it's timber, steel, plastic or glass, and a third of these described the situation as "critical".

And the CEF warns that the situation, if not addressed, could force businesses to fold and ultimately impact on jobs and livelihoods.

Amidst construction activity regaining momentum in the first six months of this year, the 80 respondents from Northern Ireland companies (with a combined annual turnover of £1.5 billion) say demand for materials has inevitably risen, but supplies have slipped and prices are rising.

For example, in December a tonne of steel averaged £500. By February that had doubled to £1,000, yet today can cost in the region of £1,400.

“These finding paint in very stark terms how the period since Christmas has seen a significant downturn in business sentiment among our members,” according to CEF managing director Mark Spence.

“While the immediate impact of the onset of the pandemic was tough, it's the challenge on materials supply and cost increases in the last number of months which are raising more fundamental questions about business survival.

“This is exacerbated by the even more worrying trend that there does not, at this stage, appear to be a forecast of costs falling back to any sort of ‘norm’, which is a vital concern for future pipelines of public sector work, as all budgets previously agreed will no longer give cover to the procuring authority to commit public funds.”

Among the key findings are:

:: 30 per cent of respondent businesses risk collapse as a result of materials shortages and cost increases;

:: Without government action on costs, 89 per cent are less inclined to bid for public contracts;

:: Materials currently in shortest supply are timber, steel, plastic/pipes, roofing, and doors/windows/glazing;

:: 71 per cent are reporting lower profit margins than 2019/20

:: Just three quarters of construction firms are operating at full or nearly full capacity.

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