Construction output has risen by the fastest rate possible in the space of eight months, as reported in February. However, optimism is fading as the industry looks ahead to the coming months and sees supply shortages and the impact of a rise in costs causing output to potentially fade. Read on to find out more!
Improvements
Housing output saw a rise from 54.3% at the beginning of the year to 61.5% in February, with construction companies reporting the highest figures they have observed for output since June 2021. While there still seems to be a continuation of volatility in the market as it relates to supply conditions and price, the total rate of growth in new orders saw a rapid acceleration from January onwards.
Client confidence appeared to improve in line with increased economic activity, as England saw plan B restrictions (mandatory face masks, work from home) lifted fully. Despite this, a substantial reporting of shortages in labour and materials continues to negatively impact the UK’s construction sector, with a rise in input costs putting an additional strain on businesses across the country.
Considerations
Experts have reiterated, however, that this accelerated growth in output demonstrates proof that the construction industry is back to its pre-pandemic levels. What is yet to be seen is how the ongoing crisis in Ukraine, and the inevitable consequences this will have on energy prices globally, will exacerbate pressures on inflation. This is yet another worry for construction project delivery at a time that is crucial to the industry, when the sector begins gearing up for the busy summer months.
Since the price of energy is already rising (liquified natural gas and oil prices are now sky high), and margins within the industry already proving thin, there is unfortunately a real possibility that pressures on inflation will drive some businesses to close. Because of unexpected trauma to the sector from past events such as Brexit, people are capable of adapting to a new environment, but only to a certain extent. Businesses are then also putting more attention on their own supply chains and understanding a real need for diversification that the industry might not have been so willing to accept before.
This could mean that the sector is better able to withstand the inevitable disruption of flow from the crisis in Ukraine, than it would have had Brexit not occurred.
Monitoring
While there may be a sense from contractors that they have been able to withstand the economic turmoil of the past couple of years in a successful manner, obstacles are going to present themselves over the coming months. Contingency plans are already being made for the taxes on residential cladding work that will be enforced by April.
For these reasons, it is increasingly important that contractors are closely monitoring the health and vitality of their personal supply chain and make efforts to help them navigate the effects of costs increasing; consistent dialogue and early engagement are a great way to achieve this. Since construction output is accelerating its best to consider that this growth is likely to slow and depreciate at some point, so look to the future and be prepared for any adjustments.
CellarTech are providers of basement & cellar conversions – supplied and built, we also undertake new build basements, underpinning, surveys, general building and home extensions. Based in the Southwest, we service clients in and around the Gloucestershire region. If you have any queries or need more advice on how to manage the rising costs of building materials, take a look at our website www.cellartechsouthwest.co.uk or give us a call on 01452 619 871 – we’d be happy to help!