According to the Construction Products Association (CPA) Construction Trade Survey for Q4 2017, the number of construction businesses struggling with rising materials, labour and energy costs has remained high throughout every quarter of last year.
This news comes as many sectors in the construction industry experienced growth in activity during 2017, which is alarming for industry professionals. Most of the reported growth came from main contractors, SMEs and manufacturers, but the civil engineering sector reported falling stats for the first time in four years.
What is causing rising materials and energy prices?
There have been a number of reasons, according to industry experts, why the raw materials costs are rising so sharply, one of which has been the steady drop in the value of the pound as a result of uncertainty over the Brexit process.
Throughout the supply chain, however, there has been an existing price pressure for raw materials and labour, and this has also been blamed on the rising challenges coming from a lack of skilled labour across the UK. According to the report, fuel and energy costs were higher for 82% of civil engineering businesses, and raw materials costs higher for 82% of main contractors and 91% for light side materials manufacturers.
Some industry professionals are disappointed by the figures, and are calling for more action to be taken to ‘bring schemes to market’, such as planned infrastructural investments within the National Infrastructure Delivery Plan, hoping that the decline will not become an industry norm, but just a ‘pause in activity’.
Rebecca Larkin, senior economist at the CPA said, ‘The Q4 survey marked the fourth consecutive quarter of falling profit margins among building contractors. This combined with Carillion’s liquidation at the start of this year only emphasises the financial strains exerted by a protracted period of rising costs passing through the supply chain. Falls in new orders reported in the four sizeable sectors of commercial, infrastructure, industrial and public non-housing add another downside to the outlook for 2018 given the early signs of slowing activity at the end of last year.’